STOCK PURCHASE AGREEMENT
BETWEEN
XXXXXXXXXX X.X.
on the one hand
AND
APPLIED POWER INVESTMENTS II, INC.
AND
APPLIED POWER INC.
on the other hand
April 28, 2000
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS................................................................ 1
1.1 Affiliate....................................................... 1
1.2 Affiliated Group................................................ 1
1.3 API............................................................. 1
1.4 ATMA Claim...................................................... 1
1.5 Business........................................................ 2
1.6 Buyer........................................................... 2
1.7 Cash............................................................ 2
1.8 Closing......................................................... 2
1.9 Closing Date.................................................... 2
1.10 Code............................................................ 2
1.11 Common Stock.................................................... 2
1.12 Company......................................................... 2
1.13 Company Leases.................................................. 2
1.14 Company Plan.................................................... 2
1.15 Company Property................................................ 3
1.16 Confidential Information........................................ 3
1.17 Disclosure Schedule............................................. 3
1.18 Distributions and Restructuring................................. 3
1.19 Employee Benefit Plan........................................... 3
1.20 Employee Pension Benefit Plan................................... 4
1.21 Employee Welfare Benefit Plan................................... 4
1.22 Encumbrances.................................................... 4
1.23 Environmental, Health, and Safety Laws.......................... 4
1.24 ERISA........................................................... 4
1.25 ERISA Affiliate................................................. 4
1.26 Financial Statements............................................ 4
1.27 Foreign Employee Plan........................................... 4
1.28 GAAP............................................................ 5
1.29 Hazardous Substances............................................ 5
1.30 HSR Act......................................................... 5
1.31 Xxxxxxxxxx...................................................... 5
1.32 Inactive Subsidiaries........................................... 5
1.33 Indemnified Party............................................... 5
1.34 Indemnifying Party.............................................. 5
1.35 Intellectual Property........................................... 5
1.36 Intellectual Property License................................... 6
1.37 Isolator Division............................................... 6
1.38 Knowledge....................................................... 6
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1.39 Legal Opinion of Buyer's Counsel................................ 6
1.40 Legal Opinion of Seller's Counsel............................... 6
1.41 Minimum......................................................... 6
1.42 Minimum Net Equity.............................................. 6
1.43 Multiemployer Plan.............................................. 6
1.44 Ordinary Course of Business..................................... 6
1.45 Per Claim Deductible............................................ 6
1.46 PBGC............................................................ 6
1.47 Person.......................................................... 7
1.48 Pre-Closing Tax Period.......................................... 7
1.49 Product Liability Claim......................................... 7
1.51 Prohibited Transaction.......................................... 7
1.52 Purchase Price.................................................. 7
1.53 Recent Financial Statements..................................... 7
1.54 Securities Act.................................................. 7
1.55 Security Interest............................................... 7
1.56 Seller.......................................................... 7
1.57 Seller's Accountants............................................ 8
1.58 Shares.......................................................... 8
1.59 Subject Transactions............................................ 8
1.60 Subsidiary or Subsidiaries...................................... 8
1.61 Tax Authority................................................... 8
1.62 Tax or Taxes.................................................... 8
1.63 Tax Reserve..................................................... 8
1.64 Tax Return...................................................... 8
1.65 Tenant Leases................................................... 8
1.66 Third Party Claim............................................... 8
ARTICLE 2
PURCHASE AND SALE OF SHARES................................................ 9
2.1 Purchase and Sale of Shares...................................... 9
2.2 Purchase Price................................................... 9
2.3 Cash Dividend to the Seller...................................... 10
2.4 Minimum Net Equity of Company and its Subsidiaries............... 10
ARTICLE 3
WARRANTIES AND REPRESENTATIONS OF THE SELLER AND API....................... 11
3.1 Organization, Qualification, and Corporate Power................. 11
3.2 Authorization.................................................... 12
3.3 Capitalization................................................... 12
3.4 Noncontravention................................................. 12
3.5 Brokers' Fees.................................................... 13
3.6 Title to Tangible Assets......................................... 13
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3.7 Subsidiaries.................................................... 13
3.8 Financial Statements............................................ 14
3.9 Subsequent Events............................................... 14
3.10 Undisclosed Liabilities......................................... 17
3.11 Legal Compliance................................................ 17
3.12 Tax Matters..................................................... 17
3.13 Real Property................................................... 19
3.14 Intellectual Property........................................... 20
3.15 Tangible Assets................................................. 24
3.16 Inventory....................................................... 24
3.17 Contracts....................................................... 24
3.18 Notes and Accounts Receivable................................... 26
3.19 Powers of Attorney.............................................. 26
3.20 Litigation...................................................... 26
3.21 Employee Benefits............................................... 27
3.22 Environment, Health, and Safety................................. 29
3.23 Employment Relations............................................ 30
3.24 Insurance....................................................... 30
3.25 No Other Agreements to Sell..................................... 31
3.26 Books and Records............................................... 31
3.27 Product Warranty................................................ 31
3.28 Affiliated Transactions......................................... 31
3.29 Accuracy of Representations..................................... 31
ARTICLE 4
WARRANTIES AND REPRESENTATIONS OF BUYER.................................... 32
4.1 Organization.................................................... 32
4.2 Authorization of Transaction.................................... 32
4.3 Noncontravention................................................ 32
4.4 Brokers' Fees................................................... 32
4.5 Investment...................................................... 32
ARTICLE 5
COVENANTS AND AGREEMENTS................................................... 33
5.1 Full Access..................................................... 33
5.2 Confidentiality................................................. 33
5.3 Notices and Consents............................................ 33
5.4 Operation of Business........................................... 34
5.5 Publicity....................................................... 34
5.6 Covenant to Satisfy Conditions.................................. 34
5.7 Supplements to Disclosure Schedule.............................. 34
5.8 Further Assurances.............................................. 34
5.9 Amounts due to or from the Company.............................. 35
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5.10 Exclusivity...................................................... 35
5.11 Certain Tax Matters.............................................. 36
(a) Taxes of Other Persons...................................... 36
(b) Returns for Periods Through the Closing Date................ 36
(c) Tax Periods Beginning Before and Ending After
the Closing Date............................................ 37
(d) Audits...................................................... 37
(e) Distributions and Restructuring............................. 37
(f) Events on Closing Date...................................... 37
(g) No New Accounting Method.................................... 37
(h) No Tax Election............................................. 37
(i) Indemnification for Post-Closing Transactions............... 38
(j) Post-Closing Transactions not in the Ordinary Course........ 38
5.12 Burbank Airport Industrial Center Lease.......................... 38
5.13 Litigation Cooperation........................................... 38
5.14 Post Retirement Liability........................................ 38
5.15 Toulouse Operation............................................... 38
5.16 Restrictive Covenant............................................. 39
5.17 Permit Transfer, Assignment or Reissuances....................... 40
5.18 U.S. Pension and Cafeteria Plans................................. 40
5.19 U.K. Pension Scheme.............................................. 42
5.20 Long-Term Disability............................................. 42
5.21 Stock Options.................................................... 42
5.22 Transfer of Intellectual Property................................ 42
5.23 Non-Competition Agreements....................................... 42
5.24 ATMA Claims...................................................... 42
5.26 Inactive Subsidiaries............................................ 43
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF BUYER......................................... 43
6.1 Representations and Warranties True.............................. 43
6.2 Performance...................................................... 43
6.3 No Proceeding or Litigation...................................... 44
6.4 No Injunction.................................................... 44
6.5 Deliveries At or Prior to Closing................................ 44
6.6 Consents......................................................... 45
6.7 Distributions and Restructuring.................................. 45
6.8 Estoppel Letters................................................. 45
6.9 Transactions with Affiliates..................................... 46
6.10 Minimum Net Equity............................................... 46
6.11 Assignment of Existing Non-Competition Agreements................ 46
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ARTICLE 7
CONDITIONS TO OBLIGATIONS OF SELLER....................................... 46
7.1 Representations and Warranties True............................ 46
7.2 Performance.................................................... 46
7.3 No Proceeding or Litigation.................................... 46
7.4 No Injunction.................................................. 46
7.5 Deliveries By Buyer At Closing................................. 47
7.6 Consents....................................................... 47
7.7 Distributions.................................................. 47
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION............................................... 48
8.1 General........................................................ 48
8.2 Survival....................................................... 48
8.3 Indemnification Covenants of Seller and API.................... 48
8.4 Indemnification Covenants of Buyer............................. 49
8.5 Claims for Indemnification..................................... 50
8.6 Indemnification Payments....................................... 52
8.7 Exclusive Remedy............................................... 52
8.8 Limitations.................................................... 52
ARTICLE 9
TERMINATION; REMEDIES..................................................... 52
9.1 Right to Terminate............................................. 52
9.2 Rights on Termination.......................................... 53
ARTICLE 10
MISCELLANEOUS PROVISIONS.................................................. 53
10.1 Amendment...................................................... 53
10.2 Waiver and Compliance.......................................... 53
10.3 Expenses....................................................... 53
10.4 Notices........................................................ 54
10.5 Assignment..................................................... 54
10.6 Governing Law.................................................. 55
10.7 Counterparts................................................... 55
10.8 Entire Agreement............................................... 55
10.9 Third Parties.................................................. 55
10.10 Severability................................................... 55
10.11 Certain Rules of Construction.................................. 55
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STOCK PURCHASE AGREEMENT
Agreement entered into on as of April 28, 2000, by and between Xxxxxxxxxx
X.X., a societe anonyme organized under the laws of France (the "Buyer") on the
one hand, and Applied Power Inc., a Wisconsin corporation ("API"), and Applied
Power Investments II, Inc., a Nevada corporation (the "Seller"), on the other
hand.
The Seller owns all of the outstanding capital stock of Xxxxx Xxxxxx
Corporation, a Massachusetts corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller, and the Seller will sell to the Buyer, all of the outstanding
capital stock of the Company in return for cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
ARTICLE 1
DEFINITIONS
-----------
In addition to the other definitions contained herein, the following
definitions shall apply for purposes of this Agreement.
1.1 Affiliate. An "Affiliate" of a legal entity means (a) any Person who
directly or indirectly controls, is controlled by or is under common control
with such legal entity, (b) any Person who is a director or officer of, member
in or trustee of, or who serves in a similar capacity with respect to, such
legal entity, or (c) any Person who directly or indirectly is the beneficial
owner of 10% or more of any securities or other ownership interests of such
legal entity. An "Affiliate" of an individual means (i) any family member of
such individual or (ii) any corporation, partnership, limited liability company,
trust or other legal entity for which such individual or any such family member
serves as an officer, director, partner, manager, trustee or in a similar
capacity. For purposes of the foregoing, control means the ownership of or right
to vote more than fifty percent (50%) of the voting shares or other interests of
a legal entity or the legal or contractual right to elect a majority of a legal
entity's board of directors or other supervisory body.
1.2 Affiliated Group. "Affiliated Group" means any affiliated group
within the meaning of Code (S)1504 or any similar group defined under a similar
provision of state, local or foreign law.
1.3 API. "API" has the meaning set forth in the preface above.
1.4 ATMA Claim. "ATMA Claim" means any claims arising from, in
connection with or as a result of the Xxxxx Control-Aerospace ATMA redesign and
part replacement for
ATMA parts sold to airlines by Company or any Subsidiary prior to Closing,
including, without limitation, ATMA redesign and part replacement for Midwest
Express Airlines and Northwest Airlines and redesign on the Boeing 717.
1.5 Business. "Business" means the business of the Company currently
conducted through both its Xxxxx Aerospace division and the Xxxxx Controls
Defense/Industrial division and includes (i) the design, development,
manufacture and sale of vibration and noise control engineer products for
aviation applications and (ii) the design, development, manufacture and sale of
shock and vibration isolation engineered products for use in the truck, defense,
medical equipment and other industrial markets, respectively.
1.6 Buyer. "Buyer" has the meaning set forth in the preface above.
1.7 Cash. "Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
1.8 Closing. "Closing" means the closing of the transaction provided for
in this Agreement which shall take place at the offices of Xxxxxxx & Xxxxx LLP,
000 X. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx commencing at 10:00 a.m. central
daylight time on such date as the Buyer, API and Seller may agree upon, but not
later than July 15, 2000.
1.9 Closing Date. "Closing Date" means the date on which the Closing
occurs.
1.10 Code. "Code" means the U.S. Internal Revenue Code of 1986, as amended.
1.11 Common Stock. "Common Stock" shall mean the Company's common stock,
par value, $1.00 per share.
1.12 Company. "Company" has the meaning set forth in the preface above.
1.13 Company Leases. "Company Leases" has the meaning set forth in Section
3.13.
1.14 Company Plan. "Company Plan" means any Employee Benefit Plan (i)
established, maintained, sponsored or contributed to (or with respect to which
any obligation to contribute has been undertaken) by API, the Seller, the
Company or any ERISA Affiliate on behalf of any employee, director or
shareholder of the Company (whether current, former or retired) or their
beneficiaries or (ii) with respect to which API, the Seller, the Company or any
ERISA Affiliate has or has had within the past six (6) years any obligation on
behalf of any such employee, director, shareholder or beneficiary.
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1.15 Company Property. "Company Property" means all real property
(including without limitation, all land and improvements thereon) owned or
leased by the Seller, API, the Company, the Subsidiaries or any of their
respective Affiliates which is primarily used in the Business.
1.16 Confidential Information. "Confidential Information" means any
information concerning the businesses and affairs of the Company and its
Subsidiaries that is not already generally available to the public.
1.17 Disclosure Schedule. "Disclosure Schedule" means the disclosure
schedule dated the date of this Agreement which has been executed by API and the
Seller and delivered to Buyer contemporaneously with the execution and delivery
of this Agreement, as the same may be amended from time to time after the date
of this Agreement and on or prior to the Closing Date in accordance with the
terms of this Agreement.
1.18 Distributions and Restructuring. "Distributions and Restructuring"
means (i) the sale by Xxxxx Controls Corporation of 49 percent of the capital
stock of Xxxxx Controls Gmbh to Applied Power Gmbh, (ii) the assignment and
transfer by Xxxxxx Line Inc. to Company of all the issued and outstanding
capital shares of Applied Power Gmbh (including all direct and indirect
subsidiaries of Applied Power Gmbh), (iii) the assignment and transfer by API of
all of the issued and outstanding capital shares of Xxxxx Xxxxxx Corporation to
Applied Power Investments II, Inc., (iv) the transactions by which preferred
stock of Xxxxxx Line Inc. is assigned and transferred to API by Affiliates of
API and then assigned and transferred by API to Seller and then assigned and
transferred by Seller to the Company, (v) the recapitalization of the preferred
stock of Xxxxxx Line Inc. into common stock of Xxxxxx Line Inc., (vi) the
merger, conversion and continuation of Xxxxxx Line Inc. into APW Ltd., a Bermuda
corporation, (vii) the assignment and transfer by the Company to Seller of all
the issued and outstanding shares of APW Ltd. (including all direct and indirect
subsidiaries of APW Ltd.), (viii) the assignment and transfer by the Company to
Seller of all the issued and outstanding shares of Applied Power Gmbh, (ix) the
assignment and transfer of all of the issued and outstanding shares of APW Ltd.
by Seller to API and then by API to its shareholders, (x) the assignment and
transfer by the Company to Seller of all executive life insurance policies
(including policy loans) and (xi) the assignment and transfer by Company to
Seller of all rights to any amount recoverable from Oracle Corp. and credit to
be provided by Oracle Corp. in connection with the settlement of claims Company
has against Oracle Corp.
1.19 Employee Benefit Plan. "Employee Benefit Plan" means any Employee
Pension Benefit Plan, Employee Welfare Benefit Plan and any other bonus, profit
sharing, group personal pension plan, pension, severance, deferred compensation,
fringe benefit, post-retirement, health, life, stock option, stock purchase,
restricted stock, tuition refund, relocation, disability, accident, sick,
vacation, holiday, termination, unemployment, individual employment, change in
control, noncompetition, and other plans, agreements, policies, trust
3
funds or arrangements (whether written or unwritten, insured or self-insured,
domestic or foreign).
1.20 Employee Pension Benefit Plan. "Employee Pension Benefit Plan" has
the meaning set forth in ERISA Section 3(2).
1.21 Employee Welfare Benefit Plan. "Employee Welfare Benefit Plan" has
the meaning set forth in ERISA Section 3(1).
1.22 Encumbrances. "Encumbrances" means Security Interests, options,
restrictions (including any voting agreements, restrictions on voting rights or
rights of disposition), claims, or third party rights of whatever nature.
1.23 Environmental, Health, and Safety Laws. "Environmental, Health, and
Safety Laws" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and
the Occupational Safety and Health Act of 1970, each as amended, together with
all other laws, rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, charges and ordinances of federal, state, local, and
foreign governments (and all agencies thereof), including the common law,
concerning injury to or pollution or protection of the environment, public
health and safety, or employee health and safety, including laws and regulations
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes or substances into ambient air (including indoor air), surface water,
ground water, or lands or property (including interiors of buildings) otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
1.24 ERISA. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.25 ERISA Affiliate. "ERISA Affiliate" means any entity that would be
deemed a "single employer" with API, the Seller or the Company under Section
414(b), (c), (m), or (o) of the Code or Section 4001 of ERISA.
1.26 Financial Statements. "Financial Statements" has the meaning set
forth in Section 3.8 below.
1.27 Foreign Employee Plan. "Foreign Employee Plan" means any employee
scheme or arrangement mandated by a government other than the United States and
any Employee Benefit Plan that is not subject to United States law and which is
maintained or contributed to by API, the Seller, the Company or any ERISA
Affiliate.
4
1.28 GAAP. "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.29 Hazardous Substances. "Hazardous Substances" means any petroleum,
petroleum products, petroleum-derived substances, radioactive materials or any
materials containing asbestos, pesticides and any chemicals, materials or
substances regulated under any Environmental, Health, and Safety Laws, or
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "extremely hazardous substances," "hazardous materials," "hazardous
constituents," "toxic substances," "pollutants," "contaminants," or any similar
denomination intended to classify or regulate such chemicals, materials or
substances by reason of their toxicity, carcinogenicity, ignitability,
corrosivity or reactivity or other characteristics under any Environmental,
Health, and Safety Laws.
1.30 HSR Act. "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
1.31 Xxxxxxxxxx. "Xxxxxxxxxx" has the meaning set forth in the preface
above.
1.32 Inactive Subsidiaries. "Inactive Subsidiaries" means Visuflex
Company, Xxxxx Xxxxxx Investment Corp., Xxxxx Xxxxxx (UK) Ltd., BW Pension Plan
Trustees Ltd. and Xxxxx Xxxxxx International Corporation.
1.33 Indemnified Party. "Indemnified Party" has the meaning set forth in
Section 8.1 below.
1.34 Indemnifying Party. "Indemnifying Party" has the meaning set forth in
Section 8.1 below.
1.35 Intellectual Property. "Intellectual Property" means (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related
5
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
1.36 Intellectual Property License. "Intellectual Property License" means
all licenses, sublicenses or agreements, except those contained in any vendor or
customer agreements, that in any way affect the rights of the Company and the
Subsidiaries to any of their Intellectual Property of the Company and the
Subsidiaries.
1.37 Isolator Division. "Isolator Division" has the meaning set forth in
Section 5.15.
1.38 Knowledge. "Knowledge" means actual knowledge of the directors or
officers of Company or Seller or the officers of API (including Xxxxxxx Xxx) as
the case may be after reasonable inquiry and the actual knowledge of the
directors of API.
1.39 Legal Opinion of Buyer's Counsel. "Legal Opinion of Buyer's Counsel"
means the legal opinions of Proskauer Rose LLP in substantially the forms
attached as Exhibit 1.39 hereto.
1.40 Legal Opinion of Seller's Counsel. "Legal Opinion of Seller's
Counsel" means a legal opinion of Xxxxxxx & Xxxxx LLP in substantially the form
attached as Exhibit 1.40 hereto.
1.41 Minimum. "Minimum has the meaning set forth in Section 8.8 hereof.
1.42 Minimum Net Equity. "Minimum Net Equity" means the amount by which
the total assets of the Company and its Subsidiaries and the Isolator Division
exceed the total liabilities of the Company and its Subsidiaries and the
Isolator Division, provided that for this purpose the term "total liabilities"
shall not include short term borrowings, current portion of long term debt, long
term debt and income taxes payable.
1.43 Multiemployer Plan. "Multiemployer Plan" has the meaning set forth in
ERISA Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.
1.44 Ordinary Course of Business. "Ordinary Course of Business" means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency).
1.45 Per Claim Deductible. "Per Claim Deductible" has the meaning set
forth in Section 8.8 hereof.
1.46 PBGC. "PBGC" means the Pension Benefit Guaranty Corporation.
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1.47 Person. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.48 Pre-Closing Tax Period. "Pre-Closing Tax Period" means (i) any
taxable period ending at or before the close of the Closing Date and (ii) the
portion of any taxable period which begins on or before and ends after the
Closing Date, comprising the period beginning on the first day of such period
and ending at the close of the Closing Date. The income allocable to a Pre-
Closing Tax Period described in clause (ii) of the preceding sentence shall be
apportioned to such period in the manner described in the last sentence of
paragraph 5.11(b).
1.49 Product Liability Claim. "Product Liability Claim" means any claim
alleging bodily injury, property damage or both which has been caused by (or
alleged to be caused by) any defect in the design, manufacture or assembly of a
product of the Company or the Subsidiaries or has been caused by any other act
or omission of the Company or any Subsidiary with respect to such product.
1.50 Product Warranty Claim. "Product Warranty Claim" means any claim
(other than the ATMA Claim) alleging any defect, deviation or other non-
conformity of a product of the Company or the Subsidiaries with (x) any product
warranty made (or alleged to have been made) by the Company or the Subsidiaries,
(y) any purchase order, agreement or contractual provision or (z) any statute,
rule or regulation.
1.51 Prohibited Transaction. "Prohibited Transaction" has the meaning set
forth in ERISA Section 406 and Code Section 4975.
1.52 Purchase Price. "Purchase Price" means cash in the amount of US
$157,500,000.
1.53 Recent Financial Statements. "Recent Financial Statements" has the
meaning set forth in Section 3.8 below.
1.54 Securities Act. "Securities Act" means the Securities Act of 1933, as
amended.
1.55 Security Interest. "Security Interest" means any mortgage, pledge,
lien, encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due
and payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings, and (c) purchase money liens and liens securing rental
payments under capital lease arrangements.
1.56 Seller. "Seller" has the meaning set forth in the preface above.
7
1.57 Seller's Accountants. "Seller's Accountants" mean
PricewaterhouseCoopers LLP.
1.58 Shares. "Shares" means all of the issued and outstanding shares of
capital stock of the Company.
1.59 Subject Transactions. "Subject Transactions" means the transactions
contemplated by this Agreement.
1.60 Subsidiary or Subsidiaries. "Subsidiary" means either Xxxxx Controls
Corporation, a Delaware corporation, or Xxxxx Controls Limited, a United Kingdom
corporation, and "Subsidiaries" means Xxxxx Controls Corporation, a Delaware
corporation, and Xxxxx Controls Limited, a United Kingdom corporation.
1.61 Tax Authority. "Tax Authority" means any federal, national, foreign,
state, municipal or other local government, or any subdivision, agency,
commission or authority thereof, of any quasi-governmental body or other
authority exercising any taxing or tax regulatory authority.
1.62 Tax or Taxes. "Tax or Taxes" means all forms of taxes, including all
federal, state, county and local income (whether net or gross), gross receipts,
capital stock, franchise, corporation profits, capital gains, withholding,
social security, unemployment, workers compensation, real property, personal
property, excise, license, severance, stamp, windfall profits, environmental
(including taxes under Code Section 59A), custom duties, occupation, sales, use,
transfer, value added, alternative minimum or other taxes, including any
interest, penalty or addition thereto.
1.63 Tax Reserve. "Tax Reserve" means the amount of current Taxes
(excluding any provision for deferred Taxes) reflected as a liability on the
Recent Financial Statements.
1.64 Tax Return. "Tax Return" means any return, declaration, report, claim
for refund or information return or statement relating to Taxes, including any
schedule or attachment thereto and any amendment thereof filed or to be filed
with any Tax Authority in connection with the determination, assessment,
collection or administration of any Taxes.
1.65 Tenant Leases. "Tenant Leases" has the meaning set forth in Section
3.13.
1.66 Third Party Claim. "Third Party Claim" has the meaning set forth in
Section 8.5(b) below.
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ARTICLE 2
PURCHASE AND SALE OF SHARES
---------------------------
2.1 Purchase and Sale of Shares. On and subject to the terms and
conditions of this Agreement (and based on the representations, warranties,
covenants and agreements set forth in this Agreement), the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the
Shares for the consideration specified below in this Section 2.
2.2 Purchase Price.
(a) The Buyer agrees to pay to the Seller at the Closing the Purchase
Price by delivery of cash for the Purchase Price payable by wire transfer or
delivery of other immediately available funds to an account or accounts
designated by Seller.
(b) At the Closing, API and the Seller shall deliver to the Buyer two
irrevocable letters of credit issued by U.S. Bank, National Association to
secure API and/or the Seller's indemnification obligations under this Agreement.
The first letter of credit shall be in the face amount of $5,000,000 and shall
be substantially in the form of Exhibit 2.2A hereto (the "Tax Claim Letter of
Credit"). The Tax Claim Letter of Credit shall secure solely the indemnification
obligations of API and the Seller contained in (i) Section 5.11 and (ii) Section
8.3(a) to the extent, and solely to the extent, that indemnification is required
under said Section 8.3(a) due to a breach of the representations and warranties
contained in Section 3.12 hereof (in either instance, the claim to which any
such indemnification relates is referred to herein as a "Tax Claim"). The second
letter of credit shall be in the face amount of $2,500,000 and shall be
substantially in the form of Exhibit 2.2B hereto (the "Non-Tax Claim Letter of
Credit" and, collectively with the Tax Claim Letter of Credit, the "Letters of
Credit"). The Non-Tax Claim Letter of Credit shall secure any and all claims for
indemnification made by the Buyer hereunder that is not a Tax Claim (a "Non-Tax
Claim" and, collectively with a Tax Claim, a "Claim").
The Buyer agrees that it will not draw under any Letter of Credit unless (w) API
and the Buyer agree that a Claim is payable, (x) the Buyer obtains a final,
nonappealable judgment that a Claim is payable, (y) in the case of the Tax Claim
Letter of Credit, the Buyer has notified API in writing of a Tax Claim, and the
amount of the Tax Claim exceeds the amount to which the Letter of Credit will by
its terms reduce, in which case the Buyer shall be entitled, no sooner than 30
days prior to the scheduled date of reduction, to draw the difference between
the Tax Claim and the amount to which the Tax Claim Letter of Credit is to be
reduced; provided, however, that nothing in this clause (y) shall preclude the
Buyer from simultaneously making any drawing under the Tax Claim Letter of
Credit pursuant to the following subsection (z), or (z) (i) in the case of the
Non-Tax Claim Letter of Credit, the Buyer has notified API of a Non-Tax Claim
and the Non-Tax Claim Letter of Credit will expire within 30 days or (ii) in the
case of the Tax Claim Letter of Credit, the Tax Claim Letter of Credit will
expire within 30 days; provided that, in the case of draws permitted by
subsections (y) or (z) above, API shall have the right to deliver to the Buyer
an original amendment to the relevant Letter of Credit extending the date of its
reduction
9
or expiry and, if API delivers an amendment to the relevant Letter of Credit
extending its date of reduction or expiry, the Buyer shall have no right to draw
under the relevant Letter of Credit solely by reason of the events described in
subsections (y) or (z) until at least 10 days before the extended date of
reduction or expiry.
2.3 Cash Dividend to the Seller. Immediately prior to the Closing, but
subject to Section 2.4(a), the Seller will cause the Company to pay the Seller
an amount (and may cause each Subsidiary of the Company to pay to the Company
any necessary component thereof) equal to the Seller's good faith estimate of
the consolidated Cash of the Company and the Subsidiaries as of the Closing. The
Seller may cause (i) the Company to make any such payment to it in the form of a
dividend or a redemption and (ii) any Subsidiary of the Company to make any such
payment to the Company in the form of a dividend or a redemption. Any payment
pursuant to this Section 2.3 shall be subject to the indemnity in Section
5.11(a).
2.4 Minimum Net Equity of Company and its Subsidiaries.
(a) API and the Seller, jointly and severally, guarantee to the Buyer
that the Minimum Net Equity as of the Closing Date will be at least US
$40,773,519.
(b) API and the Seller shall prepare a consolidated balance sheet
(the "June Balance Sheet") and statement of income of Company and its
subsidiaries as of and for the period beginning September 1, 1999 and ended
after June 1, 2000, but prior to June 10, 2000 (the date between June 1, 2000
and June 10, 2000 selected by API and Seller is referred to herein as the
"Applicable Balance Sheet Date") and such balance sheet and statement of income
are referred to collectively as the "June Financial Statements". The June
Balance Sheet shall be prepared based upon the results of a physical inventory
to be conducted on or about the Applicable Balance Sheet Date and otherwise in
accordance with the accounting assumptions, methodologies principles and
procedures used to prepare the Recent Balance Sheet, including the same
procedures as would be applicable if the June Balance Sheet was prepared as of
the end of a fiscal month. Also, API shall cause Seller's Accountant's to
perform certain agreed upon procedures related to the accounting assumptions,
methodologies and principles used to prepare the June Balance Sheet, and such
agreed upon procedures shall be reasonably acceptable to Buyer's Accountants (as
hereinafter defined) (the "Agreed Upon Procedures Report"). The Seller's
Accountants shall propose such agreed upon procedures on or before May 10, 2000
and the Seller's Accountants and Buyer's Accountants shall negotiate in good
faith to finalize such agreed upon procedures on or before May 22, 2000. Upon
completion of the preparation of the June Balance Sheet by API, API shall
deliver the June Financial Statements to Buyer together with Seller's
Accountant's Agreed Upon Procedure Report on the accounting assumptions,
methodologies used to prepare the June Balance Sheet. The Agreed Upon Procedures
Report will analyze the assumptions, methodologies, and principles employed in
preparing the June Balance Sheet and note any differences and to the extent
practicable quantifying these differences. Based solely upon the June Balance
Sheet, the
10
Seller will deliver its computation of the Minimum Net Equity as of the
Applicable Balance Sheet Date, together with all supporting documents relating
thereto (including the June Financial Statements and the Agreed Upon Procedures
Report), to the Buyer at least ten (10) days prior to the Closing Date. API and
the Seller shall grant to Buyer and Xxxxxx Xxxxxxxx LLP, certified public
accountants ("Buyer's Accountants"), full access to the books, records and
management of the Company and it Subsidiaries for the purpose of verifying its
computation of the Minimum Net Equity, shall permit Buyer's Accountants to
observe the physical inventory to be conducted in connection with the Seller's
computation of Minimum Net Equity as of the Applicable Balance Sheet Date, and
to promptly respond to questions from the Buyer's Accountant's with respect to
the computation of the Minimum Net Equity (both prior to the final computation
thereof and following the delivery of the June Financial Statements).
Notwithstanding anything herein to the contrary, (i) in no event shall the June
Balance Sheet be prepared unless all of the events referred to in the definition
of the terms Distributions and Restructuring have occurred (other than the
events described in clause (ix) thereof) and (ii) if the Closing Date shall
occur at any time after July 15, 2000, then all references herein to the
Applicable Balance Sheet Date shall be deemed to refer to the last day of the
calendar month immediately preceding the Closing Date.
ARTICLE 3
WARRANTIES AND REPRESENTATIONS OF THE SELLER AND API
----------------------------------------------------
Seller and API jointly and severally make to Buyer the following
representations and warranties in this Article 3, except to the extent otherwise
disclosed in the Disclosure Schedule.
Terms used in the Disclosure Schedule and not otherwise defined therein
have the same meanings as set forth in this Agreement. The Disclosure Schedule
shall not vary or change the literal meaning of the representations and
warranties of API and the Seller in this Agreement, other than creating specific
exceptions thereto which are directly responsive to the language of the
applicable warranties and representations.
3.1 Organization, Qualification, and Corporate Power. Each of the
Company, the Subsidiaries, API and Seller is a corporation duly organized,
validly existing, and in good standing or in "current" status under the laws of
the jurisdiction of its incorporation. Each of the Company, Subsidiaries, API
and Seller (to the extent, in the case of API and Seller, that they conduct any
portion of the Business) is duly authorized to conduct business and is in good
standing or in "current" status under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the financial condition of the Company and the
Subsidiaries taken as a whole. Each of the Company, the Subsidiaries, API and
Seller (to the extent, in the case of API and Seller, that they conduct any
portion of the Business) has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.
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Section 3.1 of the Disclosure Schedule lists the directors and officers of each
of the Company and the Subsidiaries. The Seller has provided to the Buyer
complete and correct copies of the Certificates of Incorporation and By-laws (or
comparable governing instruments) of the Company and the Subsidiaries, each as
amended to the date hereof. The Certificates of Incorporation and By-laws (or
comparable governing instruments) so delivered are in full force and effect. The
Seller has also provided or made available to the Buyer true, correct and
complete copies of the minute books of the Company and the Subsidiaries
(containing the records of meetings of stockholders, the board of directors, and
any committees of the board of directors), their respective stock certificate
books and their respective stock record books.
3.2 Authorization. The Seller and API have full corporate power and
authority to execute and deliver this Agreement and to perform their respective
obligations hereunder, including the selling and transferring of the Shares to
the Buyer. This Agreement has been duly executed and delivered by Seller and API
and constitutes the valid and legally binding obligations of the Seller and API,
enforceable in accordance with its terms and conditions.
3.3 Capitalization. The entire authorized capital stock of the Company
consists of 15,000,000 shares of common stock, of which 15,000,000 shares are
issued and outstanding and no shares of common stock are held in the treasury.
The Company has not authorized any other class of stock. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record and beneficially by the Seller.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, pre-emptive rights or
other contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock.
3.4 Noncontravention. Except as set forth in Section 3.4 of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the Subject Transactions, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of the Company and the Subsidiaries, API or the Seller is
subject or any provision of the charter or bylaws of any of the Company and the
Subsidiaries, API or the Seller, (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of the Company and the Subsidiaries is a party or by which it is
bound or to which any of its assets is subject, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice would not have a material adverse effect on
the business or financial condition of the Company and the Subsidiaries taken as
a whole or on the ability of the parties to consummate the transactions
contemplated by this Agreement or (c) result in the creation of a Security
Interest in the assets of the Company or the Subsidiaries. Except for the HSR
Act and any similar foreign law and as set forth in Section 3.4 of the
Disclosure Schedule, none of the Company or the
12
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the financial condition of the Company and the Subsidiaries taken as a whole or
on the ability of the parties to consummate the transactions contemplated by
this Agreement.
3.5 Brokers' Fees. Except as set forth in Section 3.5 of the Disclosure
Schedule, none of the Company or the Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.6 Title to Tangible Assets. Except as set forth in Section 3.6 of the
Disclosure Schedule, the Company and the Subsidiaries have good title to, or a
valid leasehold interest in, the tangible assets they use regularly in the
conduct of their businesses free from any Security Interest. Except for sales of
inventory in the Ordinary Course of Business and as disclosed in Section 3.6 of
the Disclosure Schedule, since August 31, 1999, none of the Company or the
Subsidiaries has sold, leased, transferred or assigned any material tangible
assets. Except as set forth in Section 3.6 of the Disclosure Schedule, neither
API nor the Seller or any of their respective Subsidiaries own or have any
leasehold interest in any tangible assets used in the conduct of the Business.
At closing, subject to Section 5.15, the Company and the Subsidiaries will own
and possess all of the tangible assets located at the facilities in Brighton,
Massachusetts, Burbank, California, Hersham England and Toulouse, France.
3.7 Subsidiaries. Section 3.7 of the Disclosure Schedule sets forth for
each Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number
of shares of authorized capital stock of each class of its capital stock, (iii)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder, and (iv) the number of shares of its capital stock held in treasury. All
of the issued and outstanding shares of capital stock of each Subsidiary of the
Company have been duly authorized and are validly issued, fully paid, and
nonassessable. The Company holds of record and owns beneficially all of the
outstanding shares of each Subsidiary of the Company, free from all
Encumbrances. Other than the Subsidiaries and the Inactive Subsidiaries, the
Company has no subsidiaries and no other equity investment in any corporation,
partnership or other entity or any obligation or right to make any investment in
any corporation, partnership or other entity, and is not a participant in any
joint venture or similar arrangement with any other Person. After giving effect
to the Distributions and restructuring, the Company will have no liabilities of
any nature whatsoever not directly and solely related to the Business. The
Inactive Subsidiaries are inactive corporations that do not conduct any
operations and have no liabilities. Xxxxx Controls Corporation is a holding
corporation, the only activity of which is its ownership of 49% of
13
Xxxxx Controls GmBH. No Person that prior to the Distributions and Restructuring
was a subsidiary of the Company conducts any part of the Business.
3.8 Financial Statements. Attached hereto as Schedule 3.8 of the
Disclosure Schedule are the following financial statements (collectively the
"Financial Statements"): (i) unaudited consolidated balance sheets and
statements of income as of and for the fiscal years ended August 31, 1997,
August 31, 1998, and August 31, 1999 for the Company and the Subsidiaries; and
(ii) unaudited consolidated balance sheets and statements of income (the "Recent
Financial Statements") as of and for the six months ended March 31, 2000 for the
Company and the Subsidiaries. Except as set forth in Section 3.8 of the
Disclosure Schedule, the Financial Statements are (x) true, complete and correct
in all material respects, (y) are in accordance with the books and records of
the Company and the Subsidiaries as of the dates and for the periods indicated
and (z) have been prepared substantially in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present fairly the
financial condition of the Company and the Subsidiaries as of such dates and the
results of operations of the Company and the Subsidiaries for such periods. The
unaudited consolidated balance sheet of the Company and the Subsidiaries as of
March 31, 2000 is sometimes referred to herein as the Recent Balance Sheet. The
Recent Balance Sheet includes the assets and liabilities of the Isolator
Division.
3.9 Subsequent Events. Since August 31, 1999, each of the Company and the
Subsidiaries has operated its business in the Ordinary Course of Business and
there has not been any material adverse change in the Business or the financial
condition of the Company and the Subsidiaries taken as a whole. Without limiting
the generality of the foregoing, since that date and except as set forth in
Section 3.9 of the Disclosure Schedule:
(a) none of the Company and the Subsidiaries has sold, leased,
transferred, or assigned any material assets, tangible or intangible (including
Intellectual Property), outside the Ordinary Course of Business except for the
Distributions and Restructuring, the distributions pursuant to Section 2.3
hereof and the transactions to be implemented pursuant to Section 5.9 hereof;
(b) none of the Company and the Subsidiaries has entered into any
material agreement, contract, lease, or license outside the Ordinary Course of
Business;
(c) no party (including any of the Company or the Subsidiaries or the
Seller or API with respect to the Business) has accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which any of the Company and the Subsidiaries is a party or by
which any of them is bound;
(d) none of the Company and the Subsidiaries has imposed or suffered
to exist any Security Interest upon any of its material assets, tangible or
intangible;
14
(e) none of the Company and the Subsidiaries has made any capital
expenditures in excess of $75,000;
(f) none of the Company and the Subsidiaries has made any material
capital investment in, or any material loan to, any other Person outside the
Ordinary Course of Business;
(g) the Company and the Subsidiaries have not created, incurred,
assumed, or guaranteed more than $75,000 in aggregate indebtedness for borrowed
money and capitalized lease obligations;
(h) none of the Company and the Subsidiaries has granted any material
Intellectual Property License;
(i) there has been no change made or authorized in the charter or
bylaws of any of the Company and the Subsidiaries;
(j) none of the Company or the Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(k) except for the Distributions and Restructuring and as provided in
Section 2.3 and Section 5.9 hereof, none of the Company or the Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(l) none of the Company and the Subsidiaries has experienced any
material, damage, destruction, or loss (whether or not covered by insurance) to
its property;
(m) none of the Company and the Subsidiaries has made any loan to, or
entered into any other transaction with, any of its (i) employees outside the
Ordinary Course of Business or (ii) directors or officers;
(n) none of API or the Seller with respect to the Business nor the
Company, the Subsidiaries or any ERISA Affiliate has entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement with any employee of the
Company or its Subsidiaries, outside the Ordinary Course of Business;
(o) none of API or the Seller with respect to the Business nor the
Company or any ERISA Affiliate has granted any increase in the base compensation
or made any other material change in employment terms of any of the directors,
officers, and employees of the Company and its Subsidiaries outside the Ordinary
Course of Business;
15
(p) none of API or the Seller with respect to the Business nor the
Company or any ERISA Affiliate has adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees of
the Company and its Subsidiaries (or taken any such action with respect to any
other Employee Benefit Plan);
(q) there has been no commencement of any claim, cause of action,
investigation or proceeding against or with respect to the Company, the
Subsidiaries or the Business;
(r) there has not been any sale, assignment, lease or other transfer
of any properties, Intellectual Property or assets of the Company or the
Subsidiaries, other than in the Ordinary Course of Business;
(s) there has not been any change by the Company or the Subsidiaries
in accounting principles, practices or methods, except for any change required
by reason of a change in GAAP;
(t) to the Knowledge of API, there has not been any statute, rule, or
regulation adopted which materially adversely affects the Company, the
Subsidiaries or the Business;
(u) there has not been any revaluation by the Company or the
Subsidiaries of any of its respective assets, including, without limitation,
write-offs of accounts receivable, other than in the Ordinary Course of
Business;
(v) there has not been any strike or work stoppage or slowdown or loss
of employees or customers;
(w) there has not been any forgiveness or cancellation of any debts or
claims or terminated or waived any material rights of value to the Business;
(x) there has not been any loss, nor has the Seller, the Company or
the Subsidiaries become aware of any prospective loss, of any management or
other key personnel (including, without limitation, any such loss as a result,
or in anticipation, of the consummation of the transactions contemplated by this
Agreement);
(y) there has been no grant of any severance or termination pay to any
director, executive officer or key employee of the Company or the Subsidiaries;
16
(z) there has not been any material adverse change in the financial or
other condition, commitments, assets, liabilities or earnings of the Company,
the Subsidiaries or the Business; and
(aa) none of the Company and the Subsidiaries has committed to any of
the foregoing.
3.10 Undisclosed Liabilities. To the Knowledge of API, none of the
Company, the Subsidiaries or any of the Inactive Subsidiaries have any material
indebtedness, liability or obligation (whether accrued, absolute, contingent or
otherwise and whether due or to become due), except for (i) liabilities
reflected in the Recent Balance Sheet, (ii) liabilities which have arisen after
the Recent Balance Sheet in the Ordinary Course of Business, and (iii)
liabilities described in Section 3.10 of the Disclosure Schedule.
3.11 Legal Compliance. Except as set forth in Section 3.11 of the
Disclosure Schedule, each of the Company, the Subsidiaries and the Business has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof),
except where the failure to comply would not have a material adverse effect upon
the business or financial condition of the Company and the Subsidiaries taken as
a whole. Section 3.11 of the Disclosure Schedule contains a complete and
correct list of substantially all of the permits, licenses (except motor vehicle
licenses) and governmental authorizations issued to the Company, any of its
Subsidiaries or the Seller or any of its Affiliates relating to the Business.
Except as set forth in Section 3.11 of the Disclosure Schedule, neither the
Company nor the Subsidiaries has received any notice, written or otherwise, of
any asserted violation of any laws or any investigation or review by any
governmental entity that is pending or contemplated with respect thereto, nor,
to the Knowledge of the Company and the Subsidiaries is there any reason to
anticipate that any presently existing circumstances are likely to result in any
such violation, default or non-compliance. Neither the Company nor the
Subsidiaries, nor any director, officer, administrator or employee of the
Company or the Subsidiaries acting for or on behalf of the Company or the
Subsidiaries, has paid or caused to be paid, or received or caused to be
received, directly or indirectly, in connection with the business of the Company
or the Subsidiaries: (i) any bribe, kickback or other similar payment to any
governmental entity or any agent of any supplier or customer or (ii) except in
compliance with applicable law, any contribution to any political party or
candidate (other than from personal funds of directors, officers or employees
not reimbursed by their respective employers).
3.12 Tax Matters.
(a) All Tax Returns required to be filed on or before the date hereof
by, or with respect to the Company and each of its Subsidiaries including,
without limitation, all Tax Returns of the Affiliated Group of which Company is
a member have been filed. All such Tax
17
Returns were prepared in compliance with all applicable laws and regulations and
were true, complete and correct in all material respects. All Taxes (whether or
not shown on any Tax Return) owed by, or with respect to, the Company and each
of its Subsidiaries, including, without limitation, all Taxes owed by the
Affiliated Group of which Company is member, have been timely paid or there is
an adequate reserve therefor on the books and records of account of the Company
and its Subsidiaries.
(b) Section 3.12(b) of the Disclosure Schedule indicates those income
Tax Returns that currently are the subject of audit.
(c) None of the Company or the Subsidiaries has waived any statute of
limitations in respect of income Taxes or agreed to any extension of time with
respect to an income Tax assessment or deficiency.
(d) None of the Company or the Subsidiaries is a party to any income
Tax allocation or sharing agreement.
(e) Since the Company was acquired by API, neither the Company nor any
of the Subsidiaries has been a member of an Affiliated Group filing a
consolidated federal income Tax Return other than a group the common parent of
which is API.
(f) All Taxes (whether or not shown on any Tax Return) owed or accrued
by or with respect to the Company or any of its Subsidiaries, including without
limitation, all income or franchise taxes owed by the Affiliated Group of which
Company is a member on or before the date hereof, have been timely paid, or (i)
there is an adequate Tax Reserve for the payment of such Taxes and (ii) there is
an adequate provision for current taxes on the books and records of account of
the Company and its Subsidiaries consistent with past custom and practice.
Neither the Company nor any of its Subsidiaries have incurred or accrued any
liability for Tax of any nature (matured, unmatured, fixed or contingent since
the date of the Recent Financial Statements), except for those Taxes incurred or
accrued in the Ordinary Course of Business and those Taxes incurred or accrued
in connection with the Distributions and Restructuring.
(g) Neither the Company nor any of its Subsidiaries has made, or will
become obligated to make, any "excess parachute payment" as defined in Section
280G of the Code (determined without regard to subsection (b)(4) thereof).
(h) No power of attorney, which is currently in effect, has been
granted with respect to any matter relating to Taxes of the Company or any of
its Subsidiaries.
(i) All Taxes the Company or any of its Subsidiaries is or was
obligated to withhold from amounts owing or paid to any past or present
employee, shareholder, creditor
18
or other party have been withheld and remitted to the appropriate Tax Authority
within the time required by law.
(j) There is not any agreement or consent made under Section 341(f) of
the Code affecting the Company or any of its Subsidiaries.
(k) No claim has been made by any Tax Authority in a jurisdiction
where the Company or any of its Subsidiaries do not file Tax Returns that the
Company or any of its Subsidiaries are or may be subject to taxation by that
jurisdiction.
(l) There is no tax lien imposed by any Taxing Authority imposed or
outstanding against any asset of the Company or any of its Subsidiaries.
(m) Neither the Company nor any of its Subsidiaries has entered into
any "intercompany transaction", except for the Distributions and Restructuring
and transactions pursuant to Sections 2.3 and 5.9 hereof, as to which any item
of deferred income or gain has not been restored, and no "excess loss account"
exists with respect to the stock of any of its subsidiaries, as those terms are
defined in the Treasury Regulations issued under Section 1502 of the Code.
(n) The Company does not own stock in a passive investment company
within the meaning of Section 1296 of the Code. The Company is not required to
include in income any amounts pursuant to the provisions of Subpart F of the
Code or pursuant to Section 1248 of the Code.
3.13 Real Property. None of the Seller, API, the Company, the Subsidiaries
or any of their respective Affiliates own any real estate used in the conduct of
the Business. Disclosure Schedule 3.13 lists all the Company Property and all
interests therein. Company or API has a valid and subsisting leasehold interest
in the Company Property as indicated on Disclosure Schedule 3.13, and true,
correct and complete copies of each lease (and all amendments, supplements,
extensions and other modifications thereto) granting such leasehold interests
have been furnished to Buyer (the "Company Leases"). Company and API have not
leased, licensed or entered into any other occupancy agreement (written or oral)
with respect to its interests in the Company Property, except as set forth on
Disclosure Schedule 3.13 ("Tenant Leases"), and true, correct and complete
copies of all written Tenant Leases have been delivered to Buyer. Except as
identified in Disclosure Schedule 3.13 or expressly set forth in the Tenant
Leases or Company Leases, Company and API have not entered into any agreements
(except with Buyer) for the sale, mortgage, pledge, hypothecation, encumbrance,
assignment, sublease, lease or other transfer of all or any part of any of any
Company Property or any of the rights therein (including, without limitation,
any development rights), and no Person (other than API, the Company or the
Subsidiaries) has any possessory interest (whether by pursuant to lease,
sublease, rental, license, concession or other agreement written or oral now or
hereafter in effect) or any right or option to acquire or develop, right of
first
19
refusal, right of first offer or purchase option with respect to, the
Company Property, any part thereof or any interest therein. Neither Company nor
API has been notified that any Company Lease or Tenant Lease is not in full
force and effect. Neither Company nor API are, and to the Knowledge of the
Seller and API, no other party under the Company Leases or the Tenant Leases is,
in material default thereunder, and no event has occurred that, with the giving
or notice or the passage of time, or both, would constitute a material default
by API, and to the Knowledge of the Seller and API, by any other party under any
Company Lease or Tenant Lease. Neither Company nor API has received any notice
terminating any Company Lease or Tenant Lease prior to the scheduled termination
or expiration date thereof. To the Knowledge of the Seller, Company and API,
the Company Property, and the use, operation and maintenance thereof as
presently conducted, comply (i) in all material respects with the terms and
provisions of all of the material covenants, conditions, restrictions, and the
terms and provisions of the Company Leases and (ii) in all material respects
with all applicable legal requirements including those relating to land use and
zoning.
3.14 Intellectual Property. Except as set forth in Section 3.14 of the
Disclosure Schedule:
(a) To the Knowledge of API and Seller, none of the Company and the
Subsidiaries has interfered with, infringed upon, misappropriated, or violated
any Intellectual Property rights of third parties in any material respect, and
none of the Seller, API, Company or the Subsidiaries have received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any of
the Company and the Subsidiaries must license or refrain from using any material
Intellectual Property rights of any third party) with respect to such
Intellectual Property, any trade secret material to any of the Company and the
Subsidiaries, or any Intellectual Property License which would materially
adversely affect the ability of any of the Company and the Subsidiaries to
conduct its business as presently conducted and as proposed to be conducted
pursuant to this Agreement. To the Knowledge of the Company and the
Subsidiaries, there are no presently existing United States or foreign patents
or any patent applications which if issued as patents would be infringed by any
activity of said Company and the Subsidiaries. To the Knowledge of API, the
Seller and the Company, no third party has interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of any of the
Company and the Subsidiaries in any material respect.
(b) Section 3.14 of the Disclosure Schedule hereto is a true, correct
and complete list of all U.S. and foreign patents, trademarks, and respective
applications in which the Company and the Subsidiaries have an interest or which
is otherwise used in, the Business. Section 3.14 of the Disclosure Schedule
hereto also contains a true, correct and complete list of all Intellectual
Property Licenses. In particular, each patent or registration which has been
issued or assigned to any of the Company, the Subsidiaries, or API or the Seller
or any of their respective Affiliates in the conduct of the Business and will
pursuant to Section 5.22 hereof be assigned to the Company, with respect to any
of their respective material Intellectual
20
Property, identifies each pending patent application or application for
registration which any of the Company and the Subsidiaries or API or the Seller
or any of their respective Affiliates in the conduct of the Business has made
with respect to any of its Intellectual Property, and identifies each material
Intellectual Property License, which any of the Company, the Subsidiaries or the
Seller or any of its other Affiliates with respect to the Business has granted
to or has taken from any third party with respect to any of its or said third
party's Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications and permissions (as amended to date). Section
3.14(b) of the Disclosure Schedule also identifies each material trade name or
unregistered trademark used by any of the Company, the Subsidiaries or the
Seller or any of its other Affiliates with respect to the Business. With respect
to each item of Intellectual Property required to be identified in Section 3.14
of the Disclosure Schedule:
(i) Except as disclosed in Section 3.14 of the Disclosure
Schedule, the Company and the Subsidiaries possess or will possess as of the
Closing all right, title, and interest in and to the item, free and clear of any
Security Interest, license, or other restriction and further, with respect to
any Intellectual Property necessary to conduct its business, each of the Company
and the Subsidiaries are the sole and exclusive owners of, or will be as of the
Closing and has the exclusive right to use such Intellectual Property, including
the Intellectual Property identified in Section 3.14 of the Disclosure Schedule,
in its Business; in addition, each of the Company and the Subsidiaries to their
Knowledge owns or possesses sufficient licenses or other rights to use all
Intellectual Property covered by its patents or patent applications which if
issued as patents are necessary to conduct the business of such Company and
Subsidiaries as now being conducted and as proposed to be conducted by such
Company and Subsidiaries;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, enforceability,
use, or ownership of the item;
(iv) no claim other than as disclosed in Section 3.14 of the
Disclosure Schedule is currently pending or, to the Knowledge of the Company and
the Subsidiaries, has been asserted, or threatened by any third party, nor to
the Knowledge of the Company and the Subsidiaries are there any grounds for any
claim against any of the Company and the Subsidiaries, (A) to the effect that
any operation or activity of any of the Company and the Subsidiaries or the
Business presently occurring or contemplated, including, inter alia, the
manufacture, use or sale of any software, product, device, instrument, or other
material made or used according to the patents or patent applications included
in the Intellectual Property or Intellectual Property Licenses, infringes or
misappropriates any United States or foreign copyright, patent, trademark,
service xxxx or trade secret; (B) to the effect that any other third
21
party infringes on the Intellectual Property or misappropriates any trade secret
or know-how or other proprietary rights material to any of the Company and the
Subsidiaries; (C) challenging the ownership, validity or effectiveness of any of
the Intellectual Property or trade secret material of such Company and
Subsidiaries; or (D) challenging any Intellectual Property or the Intellectual
Property Licenses of the Company and the Subsidiaries; and
(v) To the Knowledge of the Company and the Subsidiaries, there
are no presently existing United States or foreign patents or any patent
applications which if issued as patents, would be infringed by any activity of
any Company and the Subsidiaries or the conduct of the Business.
(c) With respect to the patents and patent applications listed in
Section 3.14 of the Disclosure Statement hereto (the "Patents and Applications")
as part of the Intellectual Property:
(i) To the Knowledge of the Company and the Subsidiaries, each
has been properly prepared and filed on behalf of each of the Company and the
Subsidiaries named therein and are being diligently pursued by the Company and
the Subsidiaries. The inventions described in the Patents and Applications are
assigned or licensed to the Company and the Subsidiaries and no other entity or
individual has any right or claim in any of the inventions, Patents and
Applications, or any patents to be issued therefrom, except as disclosed in
Section 3.14 of the Disclosure Schedule. None of the Company and the
Subsidiaries is aware of any defects in any of the Patents and Applications
which would cause any of them to be held invalid or unenforceable. To the
Knowledge of the Company and the Subsidiaries, each of the Company and the
Subsidiaries named in any of the Patents and Applications has filed in the
Patents and Applications to which it is a party all relevant and noncumulative
prior art of which it is aware;
(ii) none of the Company and the Subsidiaries has any knowledge
of any objection or proceeding, pending or threatened, that would affect the
validity of any patent issued pursuant thereto.
(iii) except in connection with the prosecution of the patent
applications listed on Section 3.14 of the Disclosure Statement hereto, there
are no pending judicial or governmental proceedings, including but not limited
to interferences and oppositions, relating to any of the Patents and
Applications or any other proprietary information to which the Company and the
Subsidiaries is a party or by which any property (such term "property"
specifically to include rights pursuant to licenses or options or other rights
to acquire licenses) of the Company and the Subsidiaries is subject, and no such
proceedings are threatened or contemplated by Governmental Authorities or other
third party.
(d) The Seller has delivered to or made available to the Buyer correct
and complete copies of all material Intellectual Property Licenses (as amended
to date) of the Company, the Subsidiaries and API, the Seller and their
respective Affiliates with respect to
22
the Business. With respect to each item of material Intellectual Property, to
the Knowledge of API and Seller:
(i) each of the Intellectual Property Licenses is legal,
valid, binding, enforceable, and in full force and effect;
(ii) no party to any Intellectual Property License is in
material breach or default, and no event has occurred which with notice or lapse
of time would constitute a material breach or default or permit termination,
modification, or acceleration thereunder; further, to the Knowledge of the
Company and the Subsidiaries, each of the Company and the Subsidiaries have
performed all obligations imposed upon it under each of the Intellectual
Property Licenses to which it is a party;
(iii) no party has any Intellectual Property License repudiated
any material provision thereof;
(iv) to the Knowledge of the Company and the Subsidiaries,
none of the Company and the Subsidiaries has received any notice that any other
party to any of the Intellectual Property Licenses intends to cancel, terminate
or refuse to renew the same or to exercise or decline to exercise any option or
other right thereunder;
(v) to the Knowledge of the Company and the Subsidiaries,
except for API's ownership of certain Intellectual Property which will be
transferred to the Company pursuant to Section 5.22 hereof, no director,
officer, stockholder or employee of the Company or the Subsidiaries owns,
directly or indirectly, in whole or in part, any of the Intellectual Property or
any trade secret material of any of the Company and the Subsidiaries; and
(vi) to the Knowledge of the Company and the Subsidiaries,
none of the officers, employees, consultants, distributors, agents,
representatives or advisors of any of the Company and the Subsidiaries have
entered into any agreement to which neither the Company nor any Subsidiary is a
party relating to the Company's and such Subsidiaries' business regarding know-
how, trade secrets, assignment of rights in inventions, or prohibition or
restriction of competition or solicitation of customers, or any other similar
restrictive agreement or covenant, whether written or oral, with any third party
other than the Company and the Subsidiaries.
(e) To the Knowledge of the Company and the Subsidiaries, none of the
Company and the Subsidiaries have disclosed other than in the ordinary course of
business consistent with past practice any proprietary information relating to
the Intellectual Property Licenses to any person other than to potential
investors. To the Knowledge of the Company and the Subsidiaries, each of the
Company and the Subsidiaries has at all time maintained reasonable procedures to
protect and have enforced all trade secrets of such Company and Subsidiaries. To
the Knowledge of the Company and the Subsidiaries, each of the Company
23
and the Subsidiaries has disclosed trade secrets to other third parties solely
as required for the conduct of such Company and Subsidiaries' business.
(f) To the Knowledge of the Company and the Subsidiaries, the
consummation of the transactions contemplated hereby will not alter or impair
the rights of any of the Company and the Subsidiaries to any of the Intellectual
Property, any trade secret material to any of the Company and the Subsidiaries,
or under any of the Intellectual Property Licenses.
3.15 Tangible Assets. Section 3.15 of the Disclosure Schedule contains
the most current fixed asset lists maintained by the Company or the Subsidiaries
with respect to the Business as it is presently conducted. Except as set forth
in Section 3.15 of the Disclosure Schedule, the buildings, machinery, equipment,
furniture, computers and other tangible assets that the Company and the
Subsidiaries own and lease have been maintained in accordance with normal
industry practice, and are in good operating condition and repair (subject to
normal wear and tear) and to the Knowledge of API and Seller are free from
material defects.
3.16 Inventory. Section 3.16 of the Disclosure Schedule contains the most
current inventory listings maintained by the Company or the Subsidiaries. Except
as set forth in Section 3.16 of the Disclosure Schedule, The inventory of the
Company and the Subsidiaries consists of raw materials and supplies,
manufactured and processed parts, work in process, and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured. The Company and the Subsidiaries have and at the Closing will have
an amount of inventory which is consistent with normal industry practice.
3.17 Contracts. Section 3.17 of the Disclosure Schedule lists the
following contracts and other agreements currently in effect to which any of the
Company and the Subsidiaries is a party:
(a) any agreement concerning a partnership or joint venture or for the
joint development of products sold by the Company and the Subsidiaries;
(b) any agreement with the Seller or its Affiliates;
(c) any collective bargaining agreement;
(d) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess of
$75,000 or providing severance benefits;
(e) any agreement under which it has advanced or loaned any amount to
any of its directors, officers or employees.
24
(f) any agreement containing a covenant of the Company or a Subsidiary
not to compete or any other restriction on the Company's or any Subsidiary's
ability to conduct business;
(g) any lease or similar agreement with any person (other than the
Company or a Subsidiary) under which (A) the Company or a Subsidiary is lessee
of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by any Person or (B) the Company or a Subsidiary is a
lessor or sublessor of, or makes available for use by any Person, any tangible
personal property owned or leased by the Company or a Subsidiary, which has an
aggregate annual future liability or receivable, as the case may be, in excess
of $75,000 and is not terminable by the Company or a Subsidiary by notice of not
more than 60 days for a cost of less than $75,000;
(h) (i) any continuing contract or purchase order for the future
purchase of materials, supplies or equipment, (ii) any management, service,
consulting or other similar type of contract or (iii) any advertising agreement
or arrangement, in any such case of (i), (ii) or (iii) which has an aggregate
annual future liability or receivable, as the case may be, in excess of $75,000
or which is a remaining term of more than 12 months;
(i) any agreement, contract or other instrument under which the
Company or a Subsidiary has borrowed any money from, or issued any note, bond,
debenture or other evidence of indebtedness to, any person (other than the
Company or a Subsidiary) or any other note, bond, debenture or other evidence of
indebtedness issued to any person (other than the Company or a Subsidiary);
(j) any agreement, contract or other instrument (including so-called
take or-pay or keepwell agreements) under which (i) any Person (including the
Company or a Subsidiary) has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or a Subsidiary or (ii) the Company or
a Subsidiary has directly or indirectly guaranteed indebtedness, liabilities or
obligations of any Person (in each case other than endorsements for the purpose
of collection in the ordinary course of business);
(k) any agreement, contract or other instrument under which the
Company or a Subsidiary has, directly or indirectly, made any advance, loan,
extension of credit (other than an account receivable) or capital contribution
in excess of $75,000 to, or other investment in, any Person (other than the
Company or a Subsidiary); or
(l) any agreement or instrument providing information for
indemnification of any Person with respect to liabilities relating to any
current or former business of the Company, a Subsidiary or any predecessor
person exclusive of indemnifications included in other documents listed in
Section 3.17 of the Disclosure Schedule.
25
The Seller has delivered or made available to the Buyer a correct and complete
copy of each written agreement listed in Section 3.17 of the Disclosure Schedule
(as amended to date) and a written summary setting forth the material terms and
conditions of each oral agreement referred to in Section 3.17 of the Disclosure
Schedule. Except as set forth in Section 3.17 of the Disclosure Schedule, with
respect to each such agreement, (A) the agreement is legal, valid, binding,
enforceable against the Company or the Subsidiaries and, to the Knowledge of the
Seller, the other parties thereto, and in full force and effect in all material
respects; (B) neither the Company nor the Subsidiaries, nor, to the Seller's
knowledge, the other parties thereto, is in material breach or default, and no
event has occurred which with notice or lapse of time would reasonably be
expected to constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) neither the Company
nor the Subsidiaries, nor, to the Seller's Knowledge, the other parties thereto,
has repudiated any material provision of the agreement. Except as set forth in
Section 3.17 of the Disclosure Schedule there are no change of control or
similar provisions or any obligations arising under any of the contracts listed
in Section 3.17 of the Disclosure Schedule which are created, accelerated or
triggered by the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby or thereby, and no consent
of any third party is required to be obtained or other action is required to
maintain such contracts in full force and effect after the consummation of the
transactions contemplated by this Agreement. Except as disclosed in Section 3.17
of the Disclosure Schedule, none of API, the Seller or any of their respective
Affiliates (other than the Company and the Subsidiaries) are party to, or
otherwise bound, with respect to the Business to any contract or agreement of
the type required to be disclosed pursuant to this Section 3.17
3.18 Notes and Accounts Receivable. Except as set forth in Section 3.18 of
the Disclosure Schedule, all notes and accounts receivable of the Company and
the Subsidiaries are reflected properly on their books and records, arose in the
Ordinary Course of Business and are valid receivables subject to no setoff or
counterclaims (other than returns in the Ordinary Course of Business), subject
only to the reserve for bad debts set forth on the face of the Recent Balance
Sheet as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and the
Subsidiaries.
3.19 Powers of Attorney. Except as set forth in Section 3.19 of the
Disclosure Schedule, there are no material outstanding powers of attorney
executed on behalf of any of the Company and the Subsidiaries.
3.20 Litigation. Section 3.20 of the Disclosure Schedule sets forth each
instance in which any of the Company and the Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, except where the injunction, judgment,
order, decree, ruling, action, suit, proceeding, hearing, or investigation would
not have a material adverse effect on the business or financial condition of the
Company and the
26
Subsidiaries taken as a whole. Except as set forth in Section 3.20 of the
Disclosure Schedule, no action, suit, arbitration or proceeding is pending by or
against Seller or API relating to the Company, the Subsidiaries or the Business.
3.21 Employee Benefits. Section 3.21 of the Disclosure Schedule lists each
Company Plan. True and complete copies of each of the Company Plans and related
documents have been delivered or made available to Buyer.
(a) Each such Company Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material respects
with its terms and applicable law and fiscal and regulatory requirements
including, without limitation, ERISA and the Code.
(b) All payments required by any Company Plan, any collective
bargaining agreement or other agreement or by law. (including all employer
contributions, employee salary reduction contributions, insurance premiums or
intercompany charges) which are due with respect to all periods through the
Closing Date shall have been made prior to the Closing Date (on a pro rata basis
where such payments are otherwise discretionary at year end) or provided for by
API, the Seller or the Company as applicable, by accruals on its financial
statements.
(c) Each such Company Plan which is an Employee Pension Benefit Plan
has received a determination letter from the Internal Revenue Service to the
effect that it meets the requirements of Code (S)401(a) (and each Company Plan
intended to be a tax-favored pension scheme has received Inland Revenue exempt
approval to the effect that the Company Plan satisfies applicable requirements
for tax-registered or tax-favored plans of foreign jurisdictions) and nothing
has occurred or is expected to occur through the Closing Date that caused or
could cause the loss of such qualification or tax-favored status or the
imposition of any penalty or tax liability.
(d) No claim, lawsuit, arbitration or other action has been
threatened, asserted, instituted or, to the Knowledge of API and Seller, is
anticipated against the Company Plans (other than non-material routine claims
for benefits, and appeals of such claims), any trustee or fiduciaries thereof,
API, the Seller, the Company, any ERISA Affiliate, any director, officer or
employee thereof or any of the assets of any trust of the Company Plans, and no
complaint or report has been made to the Pensions Ombudsman or to the
Occupational Pensions Regulatory Authority. No Prohibited Transaction has
occurred or is expected to occur with respect to any Company Plan. No Company
Plan is or, to the Knowledge of API and Seller, is expected to be under audit or
investigation by the Internal Revenue Service, U.S. Department of Labor, PBGC or
any other governmental authority and no such completed audit, if any, has
resulted in the imposition of any tax or penalty.
(e) With respect to each Company Plan that is funded mostly or
partially through an insurance policy, neither the Seller nor any ERISA
Affiliate has any liability in the
27
nature of retroactive rate adjustment, loss sharing arrangement or other actual
or contingent liability arising wholly or partially out of events occurring on
or before the Closing Date.
(f) No Company Plan is or was subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA.
(g) Except as set forth in Section 3.21(g)(1) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not give rise to any liability, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability or accelerate the time of payment or vesting or increase the amount of
compensation or benefits due any employee, director or shareholder of the Seller
(whether current, former or retired) or their beneficiaries solely by reason of
such transactions or by reason of a termination following such transactions. No
amounts payable under any Company Plan will fail to be deductible for federal
income tax purposes by virtue of Sections 280G or 162(m) of the Code. Except as
set forth in Section 3.21(g)(2) of the Disclosure Schedule, neither API, the
Seller, the Company nor any ERISA Affiliate maintains, contributes to or in any
way provides for any benefits of any kind whatsoever (other than under Section
4980B of the Code, the Federal Social Security Act or a plan qualified under
Section 401(a) of the Code) to any current or future retiree or terminee.
Neither API, the Seller, the Company, any ERISA Affiliate, nor any officer or
employee thereof, has made any promises or commitments, whether legally binding
or not, to create any additional plan, agreement or arrangement or to modify or
change any existing Company Plan. No event, condition or circumstance exists
that could result in an increase of the benefits provided under any Company Plan
or the expense of maintaining any Company Plan from the level of benefits or
expense incurred for the most recent fiscal year ended before the Closing Date.
Neither API, the Seller, the Company, nor any ERISA Affiliate has any unfunded
liabilities pursuant to any Company Plan that is not intended to be qualified
under Section 401(a) of the Code and that is an employee pension benefit plan
within the meaning of Section 3(2) of ERISA, a nonqualified deferred
compensation plan, an excess benefit plan or a Foreign Employee Plan. No event,
condition or circumstance exists that would prevent the amendment or termination
of any Company Plan.
(h) With respect to each Foreign Employee Plan, the fair market value
of the assets of each funded Foreign Employee Plan, the liability of each
insurer for any Foreign Employee Plan funded through insurance or the book
reserve established for any Foreign Employee Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the date of this Agreement, with respect to all current and
former participants in such Foreign Employee Plan according to the actuarial
assumptions and valuations most recently used to determine employee
contributions to such Foreign Employee Plan and no transaction contemplated by
this Agreement shall cause such assets or insurance obligations to be less than
such benefit obligations.
28
(i) There is not, and has never been, any unequal treatment in
relation to the terms on which men and women may become members of the BW
Pension Plan and the Xxxxx Controls Life Assurance Plan and the terms on which
they are treated, and the benefits payable to them, as members. The liability
for all benefits which may become payable under the Xxxxx Controls Life
Assurance Plan is fully insured with a reputable insurance company on normal
terms at normal rates. No payment from the assets of the BW Pension Plan have
been made to Xxxxx Controls Limited and Xxxxx Controls Limited has no liability
to make any payment to or in respect of the BW Pension Plan whether it is in
connection with the operation of either Section 75 of the Pensions Act or
Section 144 of the Xxxxxxx Xxxxxxx Xxx 0000 or otherwise.
3.22 Environment, Health, and Safety. Except as set forth in Section 3.22
of the Disclosure Schedule:
(a) Each of the Company and the Subsidiaries (i) has complied with
the Environmental, Health, and Safety Laws in all material respects and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
such failure to comply or asserting any liability of the Company or any of the
Subsidiaries under the Environmental Health and Safety Laws, (ii) has obtained
and is and has been in compliance in all material respects with all of the terms
and conditions of all material permits, registrations, licenses, and other
authorizations which are required under the Environmental, Health, and Safety
Laws and to the Knowledge of API and Seller no reason exists why the Company and
the Subsidiaries would not be capable of continued operation of the Business, as
currently operated, in full material compliance with such permits, licenses and
other authorizations and the applicable Environmental, Health, and Safety Laws,
and (iii) has complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in the Environmental, Health, and
Safety Laws.
(b) To the Knowledge of Seller and API, neither the Company nor any
of and the Subsidiaries has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could give rise to any material liability, for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(c) To the Knowledge of Seller and API there are no conditions
existing at any real property presently or formerly owned, used, leased,
occupied, managed or operated by the Company or any of the Subsidiaries
(collectively, the "Real Property"), or with respect to the Business, that
require remedial or corrective action, removal, monitoring or closure pursuant
to applicable Environmental, Health, and Safety Laws.
29
(d) To the Knowledge of Seller and API the Real Property does not
contain any Hazardous Substances in, on, over, under or at it, in concentrations
which would violate any applicable Environmental, Health, and Safety Laws or
would be reasonably likely to result in the imposition of liability or
obligations on the present or former owner, operator, manager or operator of the
Real Property under any applicable Environmental, Health, and Safety Laws,
including any liability or obligations for the investigation, clean-up,
corrective action, remediation or monitoring of Hazardous Substances in, on,
over, under or at the Real Property.
(e) The Company has made available to Buyer or its designated
representatives all environmental reports, assessments, audits, studies,
investigations, data, permits and other material written environmental
information in its custody, possession or control concerning the Company or any
of the Subsidiaries and the Real Property.
(f) Neither the Company nor any of the Subsidiaries has
contractually, or to the Knowledge of Seller or API, by operation of law, by the
Environmental, Health, and Safety Laws, or otherwise, assumed or succeeded to
any environmental liabilities or obligations of any predecessors or any other
Person or entity.
3.23 Employment Relations. Except as set forth in Section 3.23 of the
Disclosure Schedule, none of the Company, the Subsidiaries, the Seller or any of
its Affiliates with respect to the Business is or has ever been a party to any
collective bargaining agreement. No collective bargaining agreement is currently
being negotiated by the Company, the Subsidiaries, the Seller or any of its
Affiliates with respect to the Business and none of the Company, the
Subsidiaries, the Seller or any of its Affiliates with respect to the Business
has experienced any significant labor difficulty or dispute during the last
three years. Except as set forth in Section 3.23 of the Disclosure Schedule,
there has not been and, to the Knowledge of Seller, API, the Company and the
Subsidiaries, there will not be, any material adverse change in relations with
employees of the Company, the Subsidiaries, the Seller or any of its Affiliates
with respect to the Business as a result of the transactions contemplated by
this Agreement. Except as set forth in Section 3.23 of the Disclosure Schedule,
each of the Company, the Subsidiaries, the Seller or any of its Affiliates with
respect to the Business is, and at all times has been, in compliance, in all
material respects, with all federal, state or other applicable laws (domestic or
foreign) respecting employment practices, terms and conditions of employment and
wages and hours.
3.24 Insurance. Except as set forth in Section 3.24 of the Disclosure
Schedule, all of the assets used in the conduct of the Business of an insurable
nature and of a character usually insured by companies carrying on similar
businesses are insured in such amounts and against such losses or casualties and
with such deductibles as in the Seller's judgment are reasonable for the
properties of the Business. Section 3.24 of the Disclosure Schedule sets forth a
list and description of each policy providing such insurance coverage on the
date hereof along with all
30
other forms of insurance owned or held by, or the premium for which are paid by
the Company, the Subsidiaries or by the Seller or any Affiliate of the Seller on
behalf of the Company or the Subsidiaries, including workers' compensation,
directors' and officers liability and life insurance in respect of any director,
officer or employee of the Company or the Subsidiaries. The Company and the
Subsidiaries have not been refused any insurance or had their coverage limited
within the past three years. No breaches or defaults by the Company or the
Subsidiaries exist under any such policies. Coverage under all such policies for
the Company and the Subsidiaries are and will be continued in full force and
effect through the Closing Date but not thereafter.
3.25 No Other Agreements to Sell. None of the Company, the Subsidiaries,
the Seller or API has entered into, and there is not outstanding, any agreement,
whether oral or written, as to the sale of any Shares, the Company, the
Subsidiaries or all or any material part of the assets of the Business to any
party other than the Buyer.
3.26 Books and Records. The books and records of the Company and the
Subsidiaries are in all material respects complete and correct, have been
maintained in accordance with good business practice on a consistent basis, and
accurately reflect and evidence all material financial transactions of the
Company, the Subsidiaries, the Seller or any of its Affiliates with respect to
the Business.
3.27 Product Warranty. Section 3.27 of the Disclosure Schedule contains a
true and complete description of the product liability and product warranty
experience of the Company for the last three (3) fiscal years. During such
period neither the Company nor any Subsidiary in any one year has suffered any
Product Liability Claim or Product Warranty Claim in excess of $425,000. No
product manufactured and sold by the Company or any of its Subsidiaries prior to
Closing contains any defect, deviation or non-conformity which would give rise
to a Product Warranty Claim resulting in the Company or any Subsidiary being
liable for any consequential or special damages.
3.28 Affiliated Transactions. Set forth in Section 3.28 of the Disclosure
Schedule is the amount paid (or deemed for accounting purposes to have been
paid) by the Company or any Subsidiary, or received by the Company or any
Subsidiary from, API or any of API's Affiliates (other than the Company and the
Subsidiaries) during the current and last fiscal year for products, services or
any other reason (including, without limitation, any charge for management,
interest, capital employed, administrative, purchasing, financial or other
services).
3.29 Accuracy of Representations. The representations and warranties made
by API and the Seller herein, and the other information contained in the
Disclosure Schedule and provided to the Buyer in connection herewith, contain no
untrue statement of a material fact, or omit to state a material fact necessary
in order to make the statements contained herein not misleading. API and the
Seller are not aware of any material fact which materially adversely
31
affects the Company, the Subsidiaries, or the Business that they have not
disclosed in writing to the Buyer.
ARTICLE 4
WARRANTIES AND REPRESENTATIONS OF BUYER
---------------------------------------
The Buyer make to the Seller and API the following representations and
warranties in this Article 4.
4.1 Organization. The Buyer is duly organized under French law as a
societe anonyme; validly existing and current in all government obligations
required to maintain its existence as a corporate entity under the laws of
France.
4.2 Authorization of Transaction. The Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms and
conditions. Except for the HSR Act or for notification obligations which may
need to be satisfied to comply with european union antitrust law, the Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
4.4 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
4.5 Investment. The Buyer is not acquiring the Shares with a view to or
for sale in connection with any distribution thereof within the meaning of the
Securities Act.
32
ARTICLE 5
COVENANTS AND AGREEMENTS
------------------------
5.1 Full Access. From the date hereof to the Closing, during normal
working hours and upon reasonable advance notice, API and the Seller will cause
the Company to give Buyer and its representatives access to (and will cooperate
as Buyer may reasonably request in making available) the Company and the
Subsidiaries' facilities, books, records, employees, accountants and other
consultants, provided that such access does not unreasonably interfere with the
Company and the Subsidiaries' business or unreasonably require individuals to
work outside of their customary working hours. Such right of access includes the
right to make copies of documents and to conduct environmental assessments of
the Company and the Subsidiaries and Applied Power Europa S.A. with respect to
the Business provided it will not unreasonably interfere with the Business.
After the Closing, but subject to Section 5.2, Buyer will cause the Company to
reasonably cooperate with Seller and API and to make its books, records,
facilities and employees reasonably available to Seller and API in connection
with income tax matters directly affecting API or Seller and relating to any
period ending on or prior to the Closing, provided that such cooperation and
availability do not unreasonably interfere with the Company and the
Subsidiaries' business or unreasonably require individuals to work outside of
their customary working hours.
5.2 Confidentiality. The Buyer will hold in confidence all Confidential
Information including all documents and information furnished to it in
connection with the Subject Transactions and not otherwise lawfully available to
it, and will not use any such Confidential Information except in connection with
the Agreement, provided that if this Agreement is terminated for any reason
whatsoever, Buyer will return to API, Seller, Company and the Subsidiaries all
tangible Confidential Information which is in its possession. The obligations of
confidentiality and non-use set forth herein do not apply to information which
was previously known by such party, in the public domain through no fault of
such party, disclosed to him or it by a third party having no confidentiality
obligation to the disclosing party, or required by law (including Environmental,
Health and Safety Laws) or court order to be disclosed.
5.3 Notices and Consents. API and Seller will cause each of the Company
and the Subsidiaries to give any notices to third parties, and will cause each
of the Company and the Subsidiaries to use its commercially reasonable best
efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section 3.4 above or
otherwise necessary to consummate the Subject Transactions. To the extent
applicable to any party hereto, such party will (and the Seller and API will
cause each of the Company and the Subsidiaries to) give any notices to, make any
filings with, and use its commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3.2 and 3.4. Without
limiting the generality of the foregoing, as soon as possible after the
execution and delivery of the Agreement each of the parties will file (and the
Seller and API
33
will cause each of the Company and the Subsidiaries to file) any Notification
and Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, will use its commercially reasonable
best efforts to obtain (and the Seller and API will cause each of the Company
and the Subsidiaries to use its commercially reasonable best efforts to obtain)
a waiver from the applicable waiting period, and will make (and the Seller and
API will cause each of the Company and the Subsidiaries to make) any further
filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith.
5.4 Operation of Business. The Seller will not cause or permit any of the
Company and the Subsidiaries to engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business, except for
the Distributions and Restructuring, the payments as provided in Section 2.3
hereof and as provided in Section 5.9 hereof.
5.5 Publicity. Each party will consult with the other party prior to
issuing any press release or otherwise making any public statement with respect
to the Subject Transactions, and will not issue any such release or make any
such statement without the consent of the other party, except as required by law
or by the rules of an applicable stock exchange.
5.6 Covenant to Satisfy Conditions. API, Seller and Buyer will use their
respective commercially reasonable best efforts to ensure that the conditions
set forth in Articles 6 and 7, respectively, which are required to be satisfied
by Buyer and Seller are satisfied, including without limitation the deliveries
provided for therein. Each of the Buyer, the Seller and API agrees not to take
any action voluntarily that would or would likely result in any of its
representations and warranties set forth in this Agreement becoming untrue
(including the accuracy of the Disclosure Schedule) or in any of the conditions
to the Closing set forth in Articles 6 and 7 not being satisfied.
5.7 Supplements to Disclosure Schedule. Prior to the Closing, Seller will
promptly supplement or amend the Disclosure Schedule with respect to any fact,
matter or circumstance hereafter arising which is required to make each
representation and warranty set forth in Article 3 accurate as of the date such
supplement or amendment is made.
5.8 Further Assurances.
(a) Each party will execute such further documents and perform such
further acts as may be reasonably necessary to consummate the Subject
Transactions pursuant to the terms contained herein.
(b) If following the Closing API, Seller or any of their respective
Affiliates become aware (including by reason of notice from the Buyer) that any
tangible assets or Intellectual Property used to conduct the Business were not
transferred, delivered or assigned
34
to the Company or the Subsidiaries prior to the Closing Date, API, Seller and
their respective Affiliates shall take all action reasonably necessary to
promptly cause such transfer, delivery or assignment or any such tangible assets
or Intellectual Property to Buyer. Because any breach of this covenant will
result in immediate and irreparable injury to the Buyer for which the Buyer may
not have an adequate remedy at law, the Buyer shall be entitled in the event of
such breach and adequate proof of such breach, to a decree of specific
performance of this covenant.
5.9 Amounts due to or from the Company. Except for accrued expenses of
Company or any Subsidiary: all amounts due to the Company or any of the
Subsidiaries from API, Seller or any Affiliate of Seller as of the Closing, and
all amounts due from the Company or any of the Subsidiaries to API, Seller or
any Affiliate of Seller as of the Closing, shall be eliminated prior to the
Closing in whatever manner and transactions Seller and API may implement. For
purposes of the preceding sentence, the term "accrued expenses" includes
expenses that are typically charged through the intercompany accounts by API to
the Company or any Subsidiary, or amounts withheld from employees payroll and
subsequently paid to either taxing authorities, or to API for benefit programs,
in each case consistent with past custom and practice as reflected in the Recent
Balance Sheet. Such amounts include, but are not limited to payroll withholding
from employees for Section 125 plans, the Applied Power Stock Purchase plan,
401-k employee contributions, 401-k payments, employee insurance premiums, and
payroll taxes. Additional accrued expenses would include, but not be limited to,
the 3% 401-k employer core contributions, employer 401-k match, legal bills for
Company (other than in connection with the sale of the stock of the Company to
Buyer and the other transactions contemplated hereby) and other services such as
travel expenses and insurance that are centrally billed to API for specific
services that are in turn charged to the Company or any Subsidiary (all of which
traditionally are expenses in the income statement of the Company or any
Subsidiary).
5.10 Exclusivity. The Seller and API will not (and will not cause or
permit any of the Company and the Subsidiaries to, and the Seller and API shall
not permit or cause any of their respective officers or directors to, and the
Seller and API shall direct their employees, agents and representatives
(including any investment banker, attorney or accountant retained by either of
them) not to, directly or indirectly, solicit, initiate, or encourage the
submission of any proposal, inquiry or offer from any Person relating to the
acquisition of all or substantially all of the capital stock or assets of any of
the Company and the Subsidiaries (including any acquisition structured as a
merger, consolidation, share exchange or similar transaction) (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"). Neither
the Seller nor API will (and each of them will cause the Company and the
Subsidiaries not to), and API will not permit or cause any of its officers and
directors to, and the Seller shall direct its employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it) not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data (including, without
limitation, Confidential Information) to, or have any discussions with, any
Person relating to an Acquisition Proposal,
35
whether made before or after the date of this Agreement, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal. API will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. API agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 5.10. The Seller will
notify the Buyer immediately if any such inquiries, proposals or offers are
received by, any such information requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers. The
Seller also will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of an Acquisition
Proposal to return all confidential information (including, without limitation,
Confidential Information) heretofore furnished to such Person by or on behalf of
the Company or any of its Subsidiaries.
5.11 Certain Tax Matters.
(a) Taxes of Other Persons. API and Seller agree to indemnify the
Buyer from and against any liability of any of the Company and the Subsidiaries
for Taxes (i) under Treasury Regulations (S)1.1502-6 (or any similar provision
of state, local or foreign law) by reason of having been a member of the
Affiliated Group of which API was the common parent or any other prior
Affiliated Group on or before the Closing other than any Taxes of the Company
and the Subsidiaries, (ii) of, or attributable to, the Company or any of its
Subsidiaries with respect to a Pre-Closing Tax Period, (iii) on all transactions
contemplated or encompassed by (A) the Distributions and Restructuring as
descried in Section 1.18, (b) on the dividends described in Section 2.3 and (C)
on the amounts due to or from the Company described in Section 5.9, (iv) on
ceasing to be a member of the Affiliated Group to the extent indemnification is
not covered by any other provision of this Agreement, (v) on an income inclusion
pursuant to Subpart F of the Code to t he extent such inclusion is attributable
to earnings accrued during a Pre-Closing Tax Period of a foreign subsidiary and
(vi) on all transactions contemplated or encompassed by Section 5.15 of this
Agreement.
(b) Returns for Periods Through the Closing Date. API will include
the income of the Company and Xxxxx Controls Corporation (including any deferred
income triggered into income by Treasury Regulations (S)1.1502-13 and Treasury
Regulations (S)1.1502-14 and any excess loss accounts taken into income under
Treasury Regulations (S)1.1502-19) on API's consolidated federal and any
applicable state consolidated, combined or unitary income Tax Returns for all
periods through the Closing Date and pay any federal or state income Taxes
attributable to such income. The Company and Xxxxx Controls Corporation will
furnish Tax information to API for inclusion in API's federal consolidated and
any applicable state consolidated, combined or unitary income Tax Return for the
period which includes the Closing Date in accordance with Company's past custom
and practice. The income of the Company and Xxxxx Controls Corporation will be
apportioned to the period up to and including the Closing
36
Date and the period after the Closing Date by closing the books of the Company
and Xxxxx Controls Corporation as of the end of the Closing Date.
(c) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
income Tax Returns of the Company and its Subsidiaries for Tax periods which
begin before the Closing Date and end after the Closing Date. API or Seller
shall pay to Buyer at least five (5) days prior to the date on which income
Taxes are paid with respect to such periods an amount equal to the portion of
such Taxes which are unpaid and relate to the Pre-Closing Tax Period ending on
the Closing Date.
(d) Audits. API will allow the Company and its counsel to participate
at its own expense in any audits of API's consolidated federal income Tax
Returns to the extent that such returns relate to the Company and the
Subsidiaries. API will not settle any such audit in a manner which would
adversely affect the Company and the Subsidiaries after the Closing Date unless
such settlement would be reasonable in the case of a Person that owned the
Company and the Subsidiaries both before and after the Closing Date.
(e) Distributions and Restructuring. Seller and API agree that all of
the transactions contemplated by the Distributions and Restructuring (as
described in Section 1.18 except for the transactions in clause (ix) thereof),
the dividends payments described in Section 2.3 and the amounts due to or from
the Company described in Section 5.9 will be effectuated and completed no later
than the day before the Closing Date.
(f) Events on Closing Date. Each of Seller, API and Buyer agrees not
to cause the Company or any of its Subsidiaries to engage in any transaction on
the Closing Date outside of the Ordinary Course of its Business.
(g) No New Accounting Method. API and Seller shall cause no
accounting method to be adopted and no position to be taken by, or with respect
to, the Company or any of its Subsidiaries in any Tax Return or tax proceeding
that is inconsistent with any accounting method or position previously adopted
or taken by, or with respect to, the Company or any of its Subsidiaries in a Tax
Return that has previously been filed, unless Buyer shall provide its written
consent.
(h) No Tax Election. API and Seller shall cause no Tax election to be
made by, or with respect to, the Company or any of its Subsidiaries and shall
cause no amended Tax Return or refund claim to be filed by, or with respect to,
the Company or any of its Subsidiaries, unless Buyer shall provide its written
consent. Notwithstanding the foregoing, the Affiliated Group shall be entitled
to file an amended Tax Return or refund claim on behalf of such Group, provided
the adjustments on such amended Tax Return or such refund claim do not relate to
the Company or any of its Subsidiaries.
37
(i) Indemnification for Post-Closing Transactions. Buyer agrees to
indemnify API for any additional income Tax owed by API (including income Tax
owed by API due to this indemnification payment) resulting from any transaction
not in the Ordinary Course of Business occurring on the Closing Date after
Buyer's purchase of the Shares, provided that the transaction is initiated at
the direction of Buyer.
(j) Post-Closing Transactions not in the Ordinary Course. Buyer and
API agree that all transactions not in the Ordinary Course of Business occurring
on the Closing Date after Buyer's purchase of Shares at the direction of Buyer
shall be reported on Buyer's federal income Tax Return to the extent permitted
by Reg. (S)1.1502-76(b)(1)(ii)(B).
5.12 Burbank Airport Industrial Center Lease. API is the lessee under the
Lease Agreement between Burbank Airport Industrial Center, a California joint
venture and API dated November 22, 1993, as amended, covering the premises which
Company uses with respect to its Xxxxx Controls Aerospace division. API will
assign its lessee interest in this lease to Company and Company will agree to
assume and be bound by the provisions thereof, on or prior to Closing pursuant
to an Assignment and Assumption of Lease in the form annexed hereto as Exhibit
5.12.
5.13 Litigation Cooperation. In the event and for so long as any party is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (a) any
transaction contemplated under this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company and/or any Subsidiary, the other party will reasonably
cooperate with the contesting, or defending party and its counsel in the contest
or defense, make available its personnel, and provide such testimony and
reasonable access to its books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under Article 8 hereof).
5.14 Post Retirement Liability. The Company is obligated to provide
medical and life insurance benefits to those retired employees set forth in
Section 5.14 of the Disclosure Schedule. API will assume this liability from
Company on or before Closing. After such assumption by API, neither the Company
nor the Buyer shall have any obligation or liability whatsoever with regard to
the provision of medical and life insurance benefits to such retired employees
regardless of whether such obligation or liability arises as a result of events
occurring on, before or after such assumption.
5.15 Toulouse Operation. Applied Power Europa S.A., a subsidiary
corporation of API conducts a Xxxxx Controls Aerospace division isolator repair
and parts business at its facility in Toulouse, France (the "Isolator
Division"). API agrees to cause Applied Power Europa S.A. to transfer the
assets (tangible and intangible), business and liabilities of the
38
Isolator Division to such entity as the Buyer shall designate upon such terms
and conditions as are acceptable to Buyer and API, including the absence of any
Security Interest with respect thereto. Section 5.15 of the Disclosure Schedule
contains a balance sheet as of March 31, 2000 of the Isolator Division. A fixed
asset listing and inventory listing for the Isolator Division is included in
Sections 3.15 and 3.16 of the Disclosure Schedule hereto, respectively. API will
also cause Applied Power Europa, S.A. to enter an agreement with such entity
regarding temporary use of the portion of the Toulouse, France facility used by
the Isolator Division upon such terms and conditions as are acceptable to Buyer
and API.
5.16 Restrictive Covenant. For a period of five years after the Closing
Date, none of Seller, API nor any of their respective Affiliates shall, directly
or indirectly (whether as a shareholder, partner, lender, consultant, agent,
supplier, distributor or in any other relationship or capacity);
(a) design, develop, manufacture, sell or offer or promote for sale
any product, process, good or service that competes with, any product, process,
good or services of the Business which the Company or any of the Subsidiaries
has actually designed, developed, manufactured, sold or offered or promoted for
sale within the three years preceding the date of this Agreement (collectively,
a "Competing Product"), or otherwise engage in any business which would be
competitive with the business of the Company and the Subsidiaries as it is now
operated or as it has existed during the three years preceding the date of this
Agreement;
(b) employ, otherwise engage, or offer to employ or otherwise engage,
any employee of the Company and the Subsidiaries except for any employment
offers through a general solicitation not targeted at employees of Company or
its Subsidiaries;
(c) solicit any business from any Person that has been a customer of
the Business with respect to any Competing Product or directly or indirectly
influence any customer, supplier or other person who has a business relationship
with the Business to discontinue or reduce the extent of such relationship with
the Business.
In addition, none of the Seller, API or any of their respective Affiliates
shall ever divulge any trade secrets, customer or supplier lists, pricing
information, marketing arrangements or strategies, business plans, internal
performance statistics, training manuals or other information concerning the
Business that is competitively sensitive or confidential. Because the breach or
attempted or threatened breach of this restrictive covenant will result in
immediate and irreparable injury to the Buyer for which the Buyer may not have
an adequate remedy at law, the Buyer may be entitled in the event of such breach
and upon adequate proof of such breach in addition to all other remedies, to a
decree of specific performance of this covenant and to a temporary and permanent
injunction enjoining such breach, without posting bond or furnishing similar
security.
39
The covenant in Section 5.16(a) shall not apply to any activity of API,
Seller or any of their Affiliates after the Closing Date unrelated to the
conduct of the Business which was conducted by API, Seller, or any of their
Affiliates (other than Company and its Subsidiaries) on or prior to the Closing
Date.
5.17 Permit Transfer, Assignment or Reissuances. API and Seller will cause
each of the Company and the Subsidiaries to assist in the transfer, assignment
or securing of reissuance of any environmental permits, licenses and other
authorizations and in the provision of any required notice, to the extent that
such permits, licenses or other authorizations required to operate the Business
are required under the Environmental, Health, and Safety Laws to be transferred,
assigned or reissued, or notification is required to be provided, as a
consequence of the transactions contemplated under this Agreement.
5.18 U.S. Pension and Cafeteria Plans.
(a) On the Closing Date or as soon as practicable thereafter, API
shall contribute to the APW 401(k) Plan the matching contribution and any other
employer contribution relating to periods prior to the Closing based on the
amount or percentage that API would otherwise contribute to the APW 401(k) Plan
on behalf of each Company employee at the end of the plan year in which the
Closing occurs. In addition, API shall cause all Company employees with account
balances under the APW 401(k) Plan to be fully vested in accordance with the
provisions of Section 4.01(f) of the APW 401(k) Plan.
(b) Subject to the provisions of Section 5.18(f), on the Closing Date
or as soon as practicable thereafter (but in no event later than 60 days after
the Closing Date), API shall cause the trustee of the APW 401(k) Plan to
transfer to the trustee or funding agent of the retirement plan established or
maintained by Buyer or its affiliates that contains a cash or deferred
arrangement under Section 401(k) of the Code and designated by Buyer ("Buyer
401(k) Plan") for the benefit of the Company employees: (i) an amount in cash
equal to the shares of API common stock held in all of the accounts of the
Company employees under the APW 401(k) Plan plus; (ii) an amount in-kind equal
to the total account balances of the Company employees, excluding amounts
invested in shares of API common stock but including the promissory notes
evidencing any outstanding loans of the Company employees; plus (iii) actual
investment earnings or losses through the date of transfer, held under the APW
401(k) Plan for the Company employees, except for amounts as to which withdrawal
requests have been duly submitted prior to such transfer and which API shall
cause to be paid by the APW 401(k) Plan to the Company employees in accordance
with the Code and ERISA and the terms of the APW 401(k) Plan (amounts under (i),
(ii) and (iii) shall be referred to as the "Transferred Assets"). Prior to the
transfer of the Transferred Assets, API shall cause the trustee of the APW
401(k) Plan to liquidate shares of API common stock held in the accounts of
Company employees in accordance with applicable law and to permit Company
employees to direct the investment of such amounts from among the other
investment alternatives available under the APW 401(k) Plan. In no event shall
the Transferred Assets be less than
40
the amount required under Section 414(l) of the Code and the regulations
thereunder. Except as expressly contemplated herein, API and Buyer acknowledge
that the transfer of the Transferred Assets shall be accomplished in a manner
designed to avoid any liquidation of the accounts of the Transferred Employees.
(c) Subject to the provisions of Section 5.18(f), API represents and
warrants that, with respect to the APW 401(k) Plan no part of the Transferred
Assets are invested in employer securities (as defined in Section 407(d)(1) of
ERISA) as of the date of transfer.
(d) Subject to the provisions of Section 5.18(f), API and Buyer shall
provide each other with such records as they may reasonably request relating to
their respective obligations under this Agreement or the APW 401(k) Plan or the
Buyer 401(k) Plan and cooperate with each other (and cause the trustees of the
APW 401(k) Plan and the Buyer 401(k) Plan to cooperate with each other) to
effectuate the transfer to the Buyer 401(k) Plan of the Transferred Assets.
(e) Immediately prior to, and subject to the Closing, API shall cause
a "spin-off" of the assets and liabilities of the API Section 125 Cafeteria Plan
(which contains premium, dependent care and medical health reimbursement
component parts) (the "API Flex Plan") resulting in the division of the API Flex
Plan into two separate, identical, component plans and trusts, in accordance
with applicable law, covering, respectively (i) Company employees (and their
beneficiaries) employed on the date immediately prior to the Closing Date (the
"Company Flex Plan") and (ii) all other API Flex Plan participants (and their
beneficiaries). Immediately prior to, and subject to, the Closing, API shall
cause the Company Flex Plan to be transferred to the Company. Prior to the
Closing, API shall draft the appropriate documents in a form and substance
reasonably satisfactory to Buyer, acting reasonably, and use its commercially
best efforts to take all actions necessary, to the extent possible, to
effectuate the intent of this Section 5.18.
(f) Notwithstanding the provisions of Sections 5.18(b) and (d), Buyer
may elect, at any time on or prior to the Closing, to have the provisions of
Sections 5.18(b), (c) and (d) not apply and to permit any employee of the
Business employed on the Closing Date who has an account balance under the APW
401(k) Plan (a "Participant") to rollover (whether by direct or indirect
rollover, as selected by such Participant) his or her "eligible rollover
distribution" (as defined under Section 402(c)(4) of the Code) from the APW
401(k) Plan to the Buyer 401(k) Plan. API and the Seller acknowledge that on and
after the Closing Date the account balances of employees of the Business shall
be distributable from the APW 401(k) Plan in accordance with Section 401(k)(10)
of the Code. API and the Seller and the APW 401(k) Plan shall not place any
Participant's plan loan into default or declare a default with respect to any
plan loan so long as such Participant transfers his or her account balance under
the APW 401(k) Plan, together with the note evidencing the plan loan, to the
Buyer 401(k) Plan through a direct rollover on or as soon as administratively
practicable following the Closing. Buyer shall amend the Buyer 401(k) Plan and
API shall amend the APW 401(k) Plan
41
to the extent necessary in order to effectuate the transactions contemplated
under this Section 5.18(g). API, the Seller and Buyer shall cooperate with each
other (and cause the trustees of the APW 401(k) Plan and the Buyer 401(k) Plan
to cooperate with each other) with respect to the rollover of the distributions
to the Participants.
(g) The representations and warranties set forth in Section 3.21
hereof as they may apply to the APW 401(k) Plan and the API Flex Plan shall be
true and correct up to and including the actual date of the transfer of assets
to the Buyer 401(k) Plan and the Company Flex Plan contemplated in this Section
5.18.
5.19 U.K. Pension Scheme. API and the Seller will use their commercially
reasonable best endeavors to procure that Xxxxx Controls Limited and the BW
Pension Plan Trustees Limited cease to be the principal employer and the
trustees of the BW Pension Plan (the UK Pension Scheme) with effect from the
Closing Date and the Seller shall nominate the replacement principal employer
and trustee.
5.20 Long-Term Disability. With regard to any Company employees who are on
short term disability on the Closing Date and subsequently become entitled to
benefits under API's long term disability policy as in effect prior to the
Closing Date, API shall be responsible for such Company's employee's long term
disability benefit and such Company employee shall be covered by API's long term
disability policy.
5.21 Stock Options. API shall cause all outstanding unvested stock options
held by Company employees to become fully vested and exercisable in accordance
with the terms of the option grants.
5.22 Transfer of Intellectual Property. Prior to Closing, API will assign
to Company all of the patents, patent applications, trademark registrations and
applications which are set forth in Section 3.14 of the Disclosure Schedule and
for which API is the owner pursuant to the Assignment of Patents, Assignment of
Patent Applications and Assignment of Trademarks substantially in the forms of
Exhibits 5.22A, 5.22B and 5.22C.
5.23 Non-Competition Agreements. API and the Seller shall use their best
efforts to cause the Company and each of the individuals listed in Section 5.23
of the Disclosure Schedule to enter into non-competition agreements, in each
case, containing terms and conditions satisfactory to the Buyer.
5.24 ATMA Claims. After Closing, Buyer shall use their commercially
reasonable best efforts to cause Company to properly complete any remaining ATMA
redesign and part replacement for Midwest Express Airlines and Northwest
Airlines, if any, and the redesign on the Boeing 717 and to otherwise minimize
the potential for any ATMA claim. Nothing in this Section 5.24 shall limit the
obligations of API and Seller pursuant to Section 8.3(h).
42
5.25 Transfer to U.K. Subsidiaries. Prior to Closing, Xxxxxxxxxx may
request that API and Seller cause the Company and its Subsidiaries to, directly
or indirectly, transfer ownership of Xxxxx Xxxxxx (UK) Ltd. UK and Xxxxx
Controls Ltd. to one (1) or more foreign entities designated by Hutchinson or
otherwise restructure the existing ownership of Xxxxx Xxxxxx (UK) Ltd. UK and
Xxxxx Controls Ltd. (such transfers are hereinafter collectively referred to as
the "U.K. Restructuring"). If Hutchinson requests that API and Seller effect
the U.K. Restructuring, API and Seller agree to reasonably negotiate with
Xxxxxxxxxx the terms and conditions upon which the U.K. Restructuring will be
effected; provided, however, that it is understood and agreed that the U.K.
Restructuring will be effected without the payment of any additional
consideration to API or Seller. Xxxxxxxxxx agrees to indemnify API, Seller and
their respective affiliates from and against any liability of any of them for
Taxes arising from the transactions contemplated by the U.K. Restructuring.
5.26 Inactive Subsidiaries. On or before the Closing Date, the Seller and
API shall cause each of the Inactive Subsidiaries (other than Xxxxx Xxxxxx (UK)
Ltd.) to be dissolved, liquidated or otherwise wound up, in each case, in
accordance with applicable law, provided that API and Seller determine there is
no adverse Tax effect. Seller and API shall also review the business and
affairs of the Xxxxx Controls Corporation with a view toward making a
determination as to whether after giving effect to the consummation of the
transaction described in clause (i) of the definition of the term Distributions
and Restructuring, there is a continuing business purpose for Xxxxx Controls
Corporation. Seller and API shall advise buyer of their determination by May
31, 2000 (and the reasons therefor) and, if such determination is to the effect
that the continued corporate existence of Xxxxx Controls is unnecessary, Seller
and API shall cause Xxxxx Controls Corporation to be dissolved, liquidated or
otherwise wound up in accordance with applicable law on or before the Closing
Date.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
Each and every obligation of Buyer under this Agreement to be performed at
or before the Closing by Buyer is subject to the satisfaction, at or before the
Closing, of each of the following conditions, unless waived in writing by Buyer:
6.1 Representations and Warranties True. Each representation and warranty
of API and Seller contained in Article 3 hereof, and in all certificates
delivered by API, Seller or their representatives to Buyer pursuant hereto,
shall be true and accurate in all material respects as of the date when made and
as of the Closing as though such representation and warranty were made by API
and Seller on the Closing Date.
6.2 Performance. Seller and API shall have performed and complied with
each covenant, obligation and condition required by this Agreement to be
performed or complied with by Seller and API at or prior to the Closing.
43
6.3 No Proceeding or Litigation. No suit, action, investigation, inquiry
or other proceeding by or before any court or governmental Person shall be
instituted, pending or threatened which questions the validity or legality of
this Agreement or the Subject Transactions.
6.4 No Injunction. There shall not be any effective injunction, writ,
preliminary restraining order or any other order of any nature issued by a court
of competent jurisdiction directing that the Subject Transactions or any of them
not be consummated as so provided or imposing any condition on the consummation
of any of the Subject Transactions.
6.5 Deliveries At or Prior to Closing. Seller shall have delivered or
caused to be delivered to Buyer the following documents at or prior to the
Closing, all in form reasonably satisfactory to Buyer:
(a) Copies of resolutions of API's and Seller's Board of Directors
authorizing the execution, delivery and performance by API and Seller of this
Agreement and other documents contemplated hereby and authorizing API's and
Seller's officers to carry out and perform the terms and provisions hereof,
certified by the corporate secretary or assistant secretary of API or Seller, as
the case may be;
(b) A closing certificate from API and Seller certifying the
fulfillment by them of the conditions set forth in Sections 6.1 and 6.2;
(c) The Legal Opinion of Seller's Counsel;
(d) The stock certificates representing the Shares, free and clear of
Security Interests, duly endorsed for transfer or with duly executed stock
powers attached;
(e) A copy of the articles or certificates of incorporation of each
of the Company, its Subsidiaries and the Inactive Subsidiaries, as amended to
date, certified by the Secretary of State (or comparable official) of its
jurisdiction of organization and dated not more than thirty (30) days prior to
the Closing Date;
(f) A certificate of good standing or current status of each of the
Company, its Subsidiaries and the Inactive Subsidiaries issued by the Secretary
of State (or comparable officer) of its jurisdiction of organization and dated
not more than thirty (30) days prior to the Closing Date;
(g) A certificate of the corporate secretary or assistant secretary
of the Company certifying to the accuracy and completeness of the copy of the
by-laws of the Company attached thereto;
44
(h) Resignations of each director and officer of the Company,
Subsidiary and each Inactive Subsidiary effective as of the Closing Date;
(i) All other instruments and documents required by this Agreement to
be delivered by Seller to Buyer, and such other instruments and documents which
Buyer or its counsel may reasonably request not inconsistent with the provisions
hereof.
6.6 Consents.
(a) There shall have been secured such governmental consents,
approvals and authorizations as may be required by law, including the
termination of the waiting period under the HSR Act.
(b) There shall have been secured the consents of all Persons
(including, but not limited to, the required consents specified in paragraphs 4
and 7 of Section 3.4 of the Disclosure Schedule) who are parties to agreements
with the Company, the Subsidiaries or the Seller or any of its Affiliates which
are material with respect to the Business which are required so that neither the
execution and delivery of this Agreement or the documents contemplated hereby,
nor the consummation of the transactions contemplated hereby or thereby
(including the Subject Transactions and the Distributions and Restructuring),
will conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by, any terms of any such
agreement, or constitutes a default thereunder, or result in the creation of any
Security Interest upon any of the assets of the Company, the Subsidiaries or the
Seller or any of its Affiliates with respect to the Business, shall have been
obtained, and signed copies thereof shall have been delivered to Buyer, in form
and substance reasonably satisfactory to the Buyer.
(c) All consents referred to in Sections 6.6(a) and (b) shall be
obtained without cost (other than as provided in the last sentence of Section
10.3) or material adverse consequence to the Company and the Subsidiaries.
6.7 Distributions and Restructuring. The Distributions and Restructuring
shall have been completed, except for the assignment and transfer of all the
outstanding shares of APW Ltd. by API to its shareholders, and no change in law
or regulation shall have occurred which would result in the reasonable opinion
of the Buyer in a material tax liability to the Company or any Subsidiary as a
consequence of the Distributions and Restructuring.
6.8 Estoppel Letters. The Buyer shall have received those estoppel
letters reasonably requested by the Buyer (the "Estoppels"), in a form
reasonably satisfactory to the Buyer, from the landlords under all the Company
Leases and the tenants under all Tenant Leases. API shall request from all such
landlords and tenants estoppel letters substantially in the forms annexed hereto
as Schedule 6.8. API shall use commercially reasonable efforts to obtain
estoppel letters from all such landlords and tenants.
45
6.9 Transactions with Affiliates. All agreements relating to the conduct
of the Business to which Seller, API or any of their respective Affiliates
(other than the Company and the Subsidiaries) is a party shall be transferred
and assigned to the Company without cost or adverse consequence to the Company
and the Subsidiaries and, to the extent any such agreement is not with a third
party, such agreement shall have been terminated.
6.1 Minimum Net Equity. The Minimum Net Equity as of the Closing Date
shall not be less than $40,773,519; provided, however, if the Closing shall not
have occurred on or before July 15, 2000, Minimum Net Equity shall be computed
as of the end of the calendar month immediately preceding the date on which the
Closing occurs.
6.1 Assignment of Existing Non-Competition Agreements. API shall assign
to the Buyer, in form and substance reasonably satisfactory to the Buyer, each
of the non-competition agreements referred to in Section 5.23 of the Disclosure
Schedule.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
Each and every obligation of Seller under this Agreement to be performed by
Seller at or before Closing is subject to the satisfaction, at or before the
Closing, of each of the following conditions unless waived in writing by Seller:
7.1 Representations and Warranties True. Each representation and warranty
of Buyer contained in Article 4 hereof, and in all certificates delivered by
Buyer or its representatives to Seller or API pursuant hereto, shall be true and
accurate in all material respects as of the date when made and as of the Closing
as though such representation and warranty were made by Buyer on the Closing
Date.
7.2 Performance. Buyer shall have performed and complied with each
covenant, obligation and condition required by this Agreement to be performed or
complied with by Buyer at or prior to the Closing.
7.3 No Proceeding or Litigation. No suit, action, investigation, inquiry
or other proceeding by or before any court or governmental Person shall be
instituted, pending or threatened which questions the validity or legality of
this Agreement or the Subject Transactions.
7.4 No Injunction. There shall not be any effective injunction, writ,
preliminary restraining order or any other order of any nature issued by a court
of competent jurisdiction directing that the Subject Transactions or any of them
not be consummated as so provided or imposing any condition on the consummation
of any of the Subject Transactions.
46
7.5 Deliveries By Buyer At Closing. Buyer will deliver or cause to be
delivered to Seller the following at the Closing, all in form reasonably
satisfactory to Seller:
(a) Copies of resolutions of Buyer's Board of Directors authorizing
the execution, delivery and performance by Buyer of this Agreement and the other
documents contemplated hereby and authorizing Buyer's officers to carry out and
perform the terms and provisions hereof and thereof, certified by the corporate
secretary or assistant secretary of Buyer;
(b) A closing certificate of the President or a Vice President of
Buyer certifying the fulfillment by Buyer of the conditions set forth in
Sections 7.1 and 7.2;
(c) The Legal Opinion of Buyer's Counsel;
(d) Payment of the Purchase Price as provided in Section 2.2 hereof;
(e) A copy of the articles of organization of each of Buyer, as
amended to date, certified by the Secretary of State (or comparable official) of
its jurisdiction of organization and dated not more than thirty (30) days prior
to the Closing Date;
(f) A certificate of good standing of each of Buyer issued by the
Secretary of State (or comparable official) of its jurisdiction of organization
and dated not more than thirty (30) days prior to the Closing Date; and
(g) All other instruments and documents required by this Agreement to
be delivered by Buyer to API or Seller, and such other instruments and documents
which API or Seller or their counsel shall reasonably request not inconsistent
with the provisions hereof.
7.6 Consents. There shall have been secured such governmental consents,
approvals and authorizations as may be required by law, including the
termination of the waiting period under the HSR Act.
7.7 Distributions and Restructuring. The Distributions and Restructuring
shall have been completed, except for the assignment and transfer of all the
outstanding shares of APW Ltd. by API to its shareholders.
47
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND
-------------------------------
WARRANTIES; INDEMNIFICATION
---------------------------
8.1 General. Each party shall indemnify the other party as provided in
this Article 8. The party or parties seeking indemnification are sometimes
referred to herein as the "Indemnified Party" and the party or parties against
which indemnification is sought are sometimes referred to herein as the
"Indemnifying Party."
8.2 Survival.
--------
(a) All representations, warranties, covenants and agreements of any
party contained in this Agreement, or in any certificate delivered in connection
therewith shall survive the Closing Date, and shall not terminate except as
provided in Section 8.2(b) hereof.
(b) Each representation and warranty set forth in Article 3, (other
than (i) Sections 3.1, 3.2, 3.3, 3.12 and 3.21, all of which shall survive the
Closing for the applicable statute of limitations and (ii) Section 3.22 which
shall survive the Closing until the third anniversary thereof) or Article 4
(other than Sections 4.1 and 4.2, all of which shall survive the Closing for the
applicable statute of limitations, shall terminate on the day that is one (1)
year subsequent to the Closing Date.
8.3 Indemnification Covenants of Seller and API. Seller and API shall
jointly and severally indemnify Buyer and hold Buyer harmless from and against
any and all losses, damages, Taxes, costs, expenses, liabilities, obligations
and claims of any kind, including without limitation, reasonable attorneys' fees
and disbursements, interest or penalties (collectively "Losses") sustained or
incurred by Buyer as a result of or arising out of:
(a) any breach or inaccuracy of any representation or warranty made by
Seller and API to Buyer in this Agreement or any other agreement of API or
Seller delivered pursuant to this Agreement or in any certificate delivered by
Seller or API to Buyer pursuant to this Agreement or any other agreement of API
or Seller delivered pursuant to this Agreement;
(b) any failure of Seller or API to comply with, or any breach or
nonfulfillment by such Seller or API of, any covenant or obligation of Seller or
API set forth in this Agreement or in any certificate delivered by Seller or API
to Buyer pursuant to this Agreement;
(c) any environmental liability arising out of any of the matters set
forth in Section 3.22 of the Disclosure Schedule;
48
(d) any liability arising out of any of the litigation matters set
forth in Section 3.20 of the Disclosure Schedule;
(e) any liability for a Product Liability Claim (other than the ATMA
Claim) in excess of $500,000 for which a claim in respect of a product(s)
manufactured or sold by the Company or the Subsidiaries prior to the Closing
Date is made (or has been made) within one (1) year of the date of delivery of
the product(s) which is the subject of such claim.
(f) any liability or obligation of API, the Seller, the Company or
any ERISA Affiliate with respect to any employee benefit plan (as defined in
Section 3(3) of ERISA) (other than any liability or obligation specifically
assumed by Buyer pursuant to Section 5.18 hereof) and liabilities under the BW
Pension Plan, and liabilities for medical and life insurance benefits previously
provided by Company to certain retired employees of Company;
(g) any liability, obligation, loss or damages arising out of the
businesses of API, Seller and their respective Affiliates (other than the
Business and Company and Subsidiary);
(h) any liability in respect of, in connection with or arising from
the ATMA Claim; or
(i) any suit, action or other proceeding brought by any Person and
arising out of or in any way related to any of the matters referred to in
Section 8.3(a), 8.3(b), 8.3(c), 8.3(d), 8.3(e), 8.3(f), 8.3(g) or 8.3(h);
PROVIDED THAT, with respect to a claim for indemnification pursuant to
Section 8.3(a) or Section 8.3(i) (as it relates to Section 8.3(a)) Buyer makes a
written claim for indemnification against Seller and API pursuant to Section 8.5
hereof on or prior to the termination date set forth in Section 8.2(b).
References to Buyer in this Section 8.3 includes their shareholders and
other Affiliates, and officers, directors, agents, representatives and
successors and assigns of any of them.
8.4 Indemnification Covenants of Buyer. Buyer will indemnify Seller and
API for and hold Seller and API harmless from and against any and all any and
all losses, damages, Taxes, costs, expenses, liabilities, obligations and claims
of any kind, including without limitation, reasonable attorneys' fees and
disbursements, interest or penalties sustained or incurred by Seller or API as a
result of or arising out of:
(a) any breach or inaccuracy of any representation or warranty made
by Buyer to Seller and API in this Agreement or any other agreement of Buyer
delivered pursuant
49
to this Agreement or in any certificate delivered by Buyer to Seller or API
pursuant to this Agreement or any other agreement of Buyer delivered pursuant to
this Agreement;
(b) any failure of Buyer to comply with, or any breach or
nonfulfillment by Buyer of, any covenant of Buyer set forth in this Agreement,
or in any certificate delivered by Buyer to Seller or API pursuant to this
Agreement;
(c) any guaranty by API of, or any retention of liability by API of,
any real estate lease obligations of Company or any other obligation of Company;
or
(d) any suit, action or other proceeding brought by any Person and
arising out of or in any way related to any of the matters referred to in
Section 8.4(a), 8.4(b) or 8.4(c).
PROVIDED THAT, with respect to a claim for indemnification pursuant to
Section 8.4(a) or Section 8.4(d) (as it relates to Section 8.4(a)) the Seller
and API make a written claim for indemnification against the Buyer pursuant to
Section 8.5 hereof on or prior to the termination date set forth in Section
8.2(b).
References to Seller or API in this Section 8.4 includes their shareholders,
Affiliates and officers, directors, agents, representatives and successors and
assigns of any of them.
8.5 Claims for Indemnification.
(a) Promptly upon the Indemnified Party obtaining knowledge of any
facts causing it to believe that it has a claim for indemnification against the
Indemnifying Party hereunder, the Indemnified Party shall give written notice of
such claim to the Indemnifying Party. Such written notice shall set forth the
nature and (to the extent then known) the amount of the claim.
(b) The Indemnified Party shall tender to the Indemnifying Party the
defense of any claim, suit, proceeding, action or assessment brought by any
third party (hereinafter "Third Party Claim") for which the Indemnified Party
reasonably believes it is entitled to indemnification pursuant to this Article
8, and the Indemnifying Party shall have the right at its expense to assume the
defense thereof using counsel reasonably acceptable to the Indemnified Party.
The Indemnifying Party shall elect to assume the defense of any such Third Party
Claim by notifying the Indemnified Party within ten (10) business days following
notice from the Indemnified Party. Failure by the Indemnifying Party to assume
such defense shall be deemed a waiver by the Indemnifying Party of its right to
so defend. If the Indemnifying Party assumes such defense, the obligations of
the Indemnifying Party hereunder as to such Third Party Claim shall include
taking all steps reasonably necessary in the defense or settlement thereof.
Except with the written consent of the Indemnified Party, the Indemnifying
Party, in the defense of any such Third Party Claim, shall not consent to the
50
entry of any judgment against or adversely affecting the Indemnified Party
(other than a judgment of dismissal on the merits and without costs) or enter
into any settlement unless such settlement provides that the Indemnified Party
is fully released from all liability by the third party as to such Third Party
Claim. The Indemnified Party shall have the right to participate, at its
expense, in the defense of any such Third Party Claim.
(c) If the Indemnifying Party does not assume the defense of any
Third Party Claim as provided herein, the Indemnified Party may defend against
such Third Party Claim in such manner that the Indemnified Party deems advisable
or appropriate and may settle such Third Party Claim or consent to the entry of
judgment with respect thereto upon such terms as it deems advisable or
appropriate, and in such event the Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of such settlement or judgment and for any
and all amounts recoverable pursuant to Section 8.3 or Section 8.4, including
all damages, costs and expenses sustained or incurred by the Indemnified Party
which result from, arise out of or are incidental to the defense or settlement
of such Third Party Claim.
(d) The parties shall reasonably cooperate with each other in
connection with any Third Party Claim or other claim and provide each other with
access to relevant personnel, books, records and other information in their
possession.
(e) Notwithstanding Section 8.5(b) above, all claims by Buyer as a
result of or arising out of any breach or inaccuracy of any representation or
warranty in Section 3.22 of this Agreement, or made pursuant to Section 8.3(c)
of this Agreement, shall be promptly tendered to Seller and API, irrespective of
whether a Third Party Claim has been brought against any parties hereto. Seller
and API shall have the right, at their cost and expense, to control the
resolution, negotiation and defense of all such claims, including providing
notice to and conducting negotiations with governmental authorities; provided,
however, that Buyer shall have the right to approve any proposed resolution or
settlement by Seller and API of any such claims, which approval shall not be
unreasonably withheld. Buyer shall have the right to participate, at their
expense, in the resolution of such claims, including the right to attend any
negotiation sessions and any conferences and meetings with governmental
authorities. The parties shall use reasonable efforts to cooperate with each
other in connection with the resolution, negotiation and defense of such claims
and upon receipt of notice from Seller and API, Buyer shall provide reasonable
access to the Company Property and relevant non-confidential and non-privileged
personnel, books, records and other information in their possession. If Seller
and API do not notify Buyer that they have assumed the resolution, negotiation
and defense of the claim within ten (10) business days following their receipt
of notice of the claim, the Buyer may resolve the claim in such manner as they
deem advisable or appropriate consistent with applicable Environmental Health
and Safety Laws. In such event, the Seller and API shall promptly reimburse the
Buyer for all costs and expenses incurred to correct the breach or inaccuracy of
any representation or warranty or otherwise resolve the claim or any liabilities
arising under Section 8.3(c).
51
8.6 Indemnification Payments. All Indemnification payments under this
Article 8, shall be reduced by the amount of any insurance proceeds (less the
amount of any expected increase in premiums as a result of the payment of such
insurance claim) with respect to the claim giving rise to such indemnification
payments.
8.7 Exclusive Remedy. Buyer, Seller and API agree that the
indemnification provisions in this Article 8 and in Section 5.11(a) shall be the
sole and exclusive remedy of the Buyer and API and Seller with respect to the
Company and the Subsidiaries and the Subject Transactions.
8.8 Limitations. Notwithstanding anything to the contrary contained
herein, Buyer shall not be entitled to indemnification by reason of a breach or
inaccuracy of a representation or warranty contained in Article 3 until the
aggregate of such indemnification obligations of Seller and API exceeds
$2,500,000 (the "Minimum") in which event, Seller and API shall be liable only
for the amounts of such indemnification obligations in excess of the Minimum.
For purposes of computing the Minimum there shall be a deductible of $17,500 for
each separate claim for indemnification (the "Per Claim Deductible"). The Per
Claim Deductible shall not be includable in computing the Minimum and Seller and
API shall have no liability to Buyer for any Per Claim Deductible hereunder.
For purposes of determining if the aggregate Losses exceed the Minimum, any
payments made by Seller and API under Sections 8.3(b) through 8.3(i) (except to
the extent Section 8.3(i) relates to Section 8.3(a)) and Section 5.11(a) hereof
shall not be includable in computing the Minimum. Notwithstanding the foregoing
or anything to the contrary contained herein the aggregate maximum
indemnification liability of Seller and API under this Article 8 shall not
exceed $30,000,000, except that any indemnification obligation for Taxes
hereunder and any indemnification pursuant to Section 8.3(g) or Section 8.3(h)
or Section 8.3(i) (as it relates to Section 8.3(g)) shall not be subject to
such maximum.
ARTICLE 9
TERMINATION; REMEDIES
---------------------
9.1 Right to Terminate. Notwithstanding anything to the contrary
contained herein, this Agreement and the Subject Transactions may be terminated
at any time after July 15, 2000, if the Closing has not occurred by such date
(time being of the essence), as follows:
(a) By the mutual written agreement of all of the parties hereto;
(b) By Buyer, if any condition set forth in Article 6 has not been
satisfied (unless caused by the failure of Buyer to comply with its obligations
under this Agreement); or
(c) By Seller and API, if any condition set forth in Article 7 has not
been satisfied (unless caused by the failure of Seller or API to comply with
their obligations under this Agreement).
52
No such termination shall affect those liabilities and obligations contained in
Sections 5.2, 5.5, 9.2, or 10.3, or any other liabilities or obligations
contained herein which are expressly stated to survive the termination hereof.
9.2 Rights on Termination. If this Agreement is terminated by Seller and
API, on the one hand, or Buyer, on the other hand (collectively referred to
herein as the "Terminating Party") in accordance with Section 9.1, the
Terminating Party shall not have any claim against the other party or parties
(collectively "Other Party") except if the circumstances giving rise to such
termination are caused by or are a result of a breach or inaccuracy of a
representation, warranty, covenant or obligation of the Other Party contained in
this Agreement. If termination is by reason of such a breach or inaccuracy, the
Terminating Party shall be entitled to such remedies as may be available to it
in law or in equity. If any of the conditions set forth in Article 6 of this
Agreement have not been satisfied, Buyer may nevertheless elect to proceed with
consummation of the Subject Transactions, and if any of the conditions set forth
in Article 7 of this Agreement have not been satisfied, Seller may nevertheless
elect to proceed with the consummation of the Subject Transactions. Any such
election to proceed shall be evidenced by a certificate signed by the electing
party and shall constitute a waiver of any remedy available at law or equity by
such electing party for nonfulfillment of such conditions.
ARTICLE 10
MISCELLANEOUS PROVISIONS
------------------------
10. Amendment. This Agreement may be amended, modified and supplemented
only by written agreement of the parties hereto at any time prior to or at the
Closing with respect to any of the terms contained herein.
10. Waiver and Compliance. Any failure of Buyer, on the one hand, or
Seller and API, on the other, to comply with any obligation, covenant or
agreement herein may be expressly waived in writing by Seller and API or Buyer,
respectively, but such waiver or failure to insist upon strict compliance with
such obligation, covenant or agreement shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
10. Expenses. Whether or not the Subject Transactions are consummated,
and except as may otherwise be expressly provided herein, all fees and expenses
for brokers, attorneys, accountants and professional advisors incurred by the
Company (prior to Closing), Seller or API in connection with this Agreement and
the Subject Transactions shall be borne by Seller and/or API, and all fees and
expenses for brokers, attorneys, accountants and professional advisors incurred
by Buyer in connection with this Agreement and the Subject Transactions shall be
borne by Buyer. Buyer will pay one-half and API will pay one-half of the HSR
Act filing fee.
53
10. Notices. Each notice, request, demand or other communication
("Notice") by a party to another party required or permitted by this Agreement
shall be in writing and shall be personally delivered, sent by U.S. certified
mail, return receipt requested (postage prepaid), sent by overnight commercial
courier (charges prepaid), or sent by facsimile transmission (but each such
facsimile transmission shall be confirmed by sending a copy thereof to the other
party by certified mail or commercial courier as provided herein no later than
the following business day), addressed to the address of the receiving party set
forth below or to such other address as such party shall have communicated to
the other parties in accordance with this Section. Any notice shall be deemed
to have been given when personally delivered, on the date of sending when sent
by facsimile transmission, on the third business day following the date of
sending when sent by certified mail or on the first business day following the
date of sending when sent by overnight commercial courier.
To Seller or API: Applied Power Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: President
Fax: 000-000-0000
With a copy to: Xxxxxxx X. Xxxxxx, III, Esq.
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxx & Xxxxx LLP
Suite 2040
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Fax: 000-000-0000
To Buyer: Xxxxxxxxxx, X.X.
0 Xxx Xxxxxx
Xxxxx, Xxxxxx 00000
Attention: President
Fax: 00-000000000
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx
Fax: 000-000-0000
10. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other party,
54
whether by operation of law or otherwise, provided that if the Buyer shall merge
or consolidate with or into, or transfer substantially all of its assets thereof
to another corporation or other form of business or other entity, or transfer
the stock of Company to an Affiliate of Buyer, this Agreement may be assigned or
transferred to such successor or Affiliate of Buyer (without the prior written
consent of Seller and API) and it shall be binding upon and inure to its
benefit.
10. Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York, without regard to principles of conflict of laws.
10. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10. Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, the Disclosure Schedule (which constitutes a part of this
Agreement as if set forth in full herein) and the other documents and
certificates delivered pursuant to the terms hereof, sets forth the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, of any party hereto, except for the Confidentiality Agreement
dated January 28, 2000, between API and Buyer.
10. Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person other than the parties hereto and their
permitted assigns, any rights or remedies under or by reason of this Agreement.
10. Severability. The invalidity of any provision or portion of a
provision of this Agreement shall not affect the validity of any other provision
of this Agreement or the remaining portion of the applicable provision.
10. Certain Rules of Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent and no rule of strict construction shall be applied against any
party by virtue of its counsel having drafted this Agreement or otherwise. The
term "including" as used in this Agreement in connection with the listing of
items included within a prior reference, shall be interpreted to be illustrative
only, and shall not be interpreted as a limitation on or an exclusive listing of
the items included within the prior reference. References to Sections herein
include all subsections which are subsidiary to the Section referred to. The
headings and captions of the Sections and Articles of this Agreement as well as
the recitals hereto are inserted for
55
convenience only and shall not constitute a part hereof or affect in any way the
meaning or interpretation of this Agreement.
[Rest of Page Intentionally Left Blank]
56
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
all as of the day and year first above written.
Applied Power Investments II, Inc.
By: _______________________________
Title: ______________________________
Applied Power Inc.
By: _______________________________
Title: ______________________________
Xxxxxxxxxx, X.X.
By: _______________________________
Title: ______________________________
57
INDEX OF EXHIBITS AND SCHEDULES
STOCK PURCHASE AGREEMENT BETWEEN
XXXXXXXXXX X.X.
On the one hand
AND
APPLIED POWER INVESTMENTS II, INC.
AND
APPLIED POWER INC.
On the other hand
EXHIBITS SECTION
-------- -------
Exhibit 1.39 Legal Opinion of Buyer's Counsel 1.39
Exhibit 1.50 Legal Opinion of Seller's Counsel 1.50
Exhibit 2.2A Tax Claim Letter of Credit 2.2(b)
Exhibit 2.2B Non-Tax Claim Letter of Credit 2.2(b)
Exhibit 5.22A Assignment of Patents 5.22
Exhibit 5.22B Assignment of Patent Applications 5.22
Exhibit 5.22C Assignment of Trademarks 5.22
Exhibit 5.12 Assignment and Assumption of Lease 5.12
SCHEDULES
---------
Schedule 6.8 Estoppel Letters 6.8
Disclosure Schedule 1.17
58